By Xavier Fontdegloria
Activity in the U.S. manufacturing sector slowed in August as strong demand for goods met with persistent capacity constraints and material shortages that constrained output growth.
The final reading for the U.S. Manufacturing Business Activity PMI for August came in at 61.1, data from IHS Markit showed Wednesday. This is down from the 63.4 level registered in July, which marked a survey record-high, and marginally below the preliminary estimate of 61.2.
The reading broadly matched estimates from economists polled by The Wall Street Journal. A reading above 50 indicates an expansion of activity, while below this threshold signals a contraction.
Goods producers registered marked upturns in output and new orders in August as demand flourished, but constraints on production due to material shortages exerted further pressure on capacity as backlogs of work rose at a near-record rate, the report said.
"Not only were firms facing difficulties trying to clear outstanding work, they also faced further hikes in supplier costs," said Sian Jones, senior economist at IHS Markit.
The pace of cost inflation exceeded the previous series record amid the scarcity of inputs, and strong demand allowed finished goods prices to also rise at an unprecedented rate, she said.
Backlogs of work rose markedly at one of the sharpest rates on record, while firms reported challenges retaining staff despite a further increase in employment, the report said. These labor shortages exacerbated constraints on capacity, it said.
Confidence among goods producers regarding the outlook for output over the coming year strengthened in August due to hopes of further growth in client demand, IHS Markit said.
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(END) Dow Jones Newswires
September 01, 2021 10:19 ET (14:19 GMT)Copyright (c) 2021 Dow Jones & Company, Inc.