By Xavier Fontdegloria

 

The U.S. manufacturing sector accelerated its expansion pace in July, growing at the highest level in at least 14 years, amid unprecedented supplier shortages and inflation pressures.

The final reading for the U.S. Manufacturing Business Activity PMI for July was 63.4, a fresh record-high, data from IHS Markit showed Monday. In June, the index came in at 62.1 while July's preliminary estimate was at 63.1.

The reading beat estimates from economists polled by The Wall Street Journal, who expected the PMI to come in at 63.1.

The indicator suggests that the manufacturing economy is expanding solidly, as it is well-above the 50-point level that separates expansion from contraction.

"July saw manufacturers and their suppliers once again struggle to meet booming demand, leading to a further record jump in both raw material and finished goods prices," said Chris Williamson, chief business economist at IHS Markit.

Output continued to lag well behind order book growth to one of the greatest extents in the survey's 14-year history, leading to a near-record build-up of uncompleted orders, he said.

The rise of the headline figure was driven by the expansion in production, an upturn reportedly linked to stronger client demand and efforts to clear backlogs of work. New orders also rose at a robust rate, IHS Markit said.

However, unprecedented supplier shortages and delays continued to exert upward pressure on input costs and stymie firms' ability to process incoming new work, the report said.

"Capacity is being constrained by yet another unprecedented lengthening of supply chains, with delivery delays reported far more widely in the past two months than at any time prior in the survey's history," Mr. Williamson said.

Price pressures kept building up, with both the rate of cost inflation and selling prices being the sharpest on record. The uptick in output charges was overwhelmingly attributed to efforts to pass through higher costs, IHS Markit said.

 

Write to Xavier Fontdegloria at xavier.fontdegloria@wsj.com

 

(END) Dow Jones Newswires

August 02, 2021 10:19 ET (14:19 GMT)

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