The U.S. grew rapidly again in June as the economy returned closer to normal, a pair of surveys show, but widespread shortages of labor and supplies raised costs for businesses and added to rising inflation.
The research firm IHS Markit said its flash or preliminary survey of U.S. manufacturers rose in the June to the highest level on record. The index edged up to 62.6 from 62.1.
A similar survey of service-oriented companies — banks, restaurants, retailers and the like — fell from a record high in May but was still very strong. The index dipped to 64.8 from 70.4 in May.
The U.S. economy has surged since the spring owing to massive federal stimulus and a waning coronavirus pandemic. With Covid cases falling to the lowest level in a year, states have removed almost all restrictions on business and Americans are eager to resume normal activities.
Yet the explosive growth in the economy, fueled in part by so much stimulus, has caused the demand for goods and services to outstrip the ability of companies to supply them.
Companies are scrambling to find supplies and in many cases paying more for them. To offset higher costs, they are charging customers more.
At the same time, many companies say they cannot find enough workers in order to keep up with demand. Some are raising wages to attract employees while others have scaled back production.
All of these bottlenecks are contributing to the biggest increase in inflation in at least 13 years. The Federal Reserve insists inflation will ease once the U.S. and global economies return to normal, but the process could take a year or more to play out.
“It’s clear that the economy continues to run very hot,” said Chris Williamson, chief business economist at IHS Markit.
“Prices charged for goods and services are still rising very sharply, record supply shortages are getting worse rather than better, firms are fighting to fill vacancies and manufacturers’ warehouse stocks are being depleted at a worrying rate as firms struggle to meet demand,” he said.