S&P Global's flash PMI readings indicate that U.S. business activity recovered in April after nearly stalling the prior month, but the upswing came alongside worsening delivery times to factories and a sharp rise in inflationary signals.
The S&P Global flash U.S. Composite PMI Output Index, which combines manufacturing and services, rose to 52.0 in April from 50.3 in March. Readings above 50 signal expansion in the private sector. Economists polled by Reuters had expected the PMI to be little changed at 50.6.
The stronger composite reading was driven principally by manufacturing. S&P Global said the improvement reflected - in part - "stock building in the face of concerns over supply availability and price hikes." The manufacturing PMI climbed to 54.0 in April from 52.3 in March, reaching a 47-month high and exceeding economists' expectations for a reading of 52.5. A closely watched component, new orders received by factories, jumped to 54.8 from 52.3 in March.
The services sector also rebounded. The services PMI rose to 51.3 in April from 49.8 in March, the latter having been the first contraction in that sector since January 2023. Chris Williamson, chief business economist at S&P Global Market Intelligence, said the April PMI "is broadly consistent with the economy struggling to manage annualized growth in excess of 1%, with the vast service sector acting as the principal drag."
Supply chain strains were a central theme in the survey. S&P Global cited shipping disruptions tied to the U.S.-Israel war with Iran as a key cause of longer supplier delivery times to factories. The firm said Tehran effectively closed the Strait of Hormuz after U.S.-Israeli strikes on Iran began on February 28. Those disruptions boosted oil prices as well as prices for other commodities including fertilizers, petrochemicals and aluminum. The survey also noted that companies increased purchases of safety stocks, which contributed to longer delivery times.
The conflict's impact on logistics showed up in S&P Global's prices data. Its measure of output prices rose to 59.9 in April from 58.1 in March, the highest reading since July 2022. S&P Global said the jump mainly reflected delays getting supplies to factories due to the Middle East conflict. Prior to the war, the report noted, suppliers faced constraints from Trump's sweeping tariffs.
Delivery times to factories were the longest since August 2022, according to S&P Global, and the survey's measure of prices paid by businesses for inputs increased to an 11-month high of 62.6 from 60.9 in March. S&P Global said that because of shortages and the surge in input costs, average prices charged for goods and services rose in April at the fastest rate since July 2022.
Those readings strengthen expectations among economists that inflation could accelerate in the months ahead and that the Federal Reserve may delay cutting interest rates. Williamson commented that "it will likely be increasingly hard to make a case for rate cuts if inflation follows the path signaled by the PMI while the economy continues to eke out only modest growth."
On employment, the survey showed only modest improvement. The S&P Global gauge of private-sector employment inched up to 50.2 in April after falling to 49.7 in March. Within the data set, manufacturing firms reported a reduction in headcount, while employment in the services industry barely increased. S&P Global said resignations and ongoing labor supply shortages were part of the explanation for weak overall business employment, and that companies also reported concerns over the need to reduce staffing costs amid uncertain demand and high input prices.
Implications for transportation and logistics
From a freight and supply chain perspective, the S&P Global survey highlights two simultaneous dynamics: increased demand for inventory replenishment by manufacturers and a deterioration in the speed and predictability of shipments. The effective closure of the Strait of Hormuz and the associated shipping disruptions have pushed commodity prices higher and led firms to purchase additional safety stocks, both of which can increase freight volumes and change modal mixes, while also placing upward pressure on logistics costs.
Longer delivery times combined with higher input costs may encourage businesses to re-evaluate routing, inventory buffers and supplier diversification, but the survey makes clear that firms face limited options in the near term given the ongoing geopolitical pressures and pre-existing tariff-related supplier constraints.
Data caveats
The flash PMI is an early-month indicator based on survey responses and is subject to revision when the full monthly release is published. Where the survey links delivery delays and price pressures to the U.S.-Israel war with Iran, it reports firms' assessments rather than independently establishing causality. The PMI readings reflect the prevailing conditions firms reported in April.