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The US economy's March rebound may have only been a warm-up.
Two popular gauges of business activity swung even higher in preliminary April readings, according to analytics firm IHS Markit. The services activity index leaped to 63.1 from 60.4, indicating the fastest level of expansion since data collection began in 2009. The firm's manufacturing index rose to 60.6 from 59.1, also a record.
Markit's composite index soared to an all-time high of 62.2 from 59.7. Readings above 50 indicate sector growth, while those below the threshold signal contraction.
The broad improvements were largely driven by the loosening of economic restrictions and strong demand from consumers, Markit said in the Friday report. Continued vaccination also contributed to stronger activity at service businesses. Manufacturers were able to accelerate production despite lingering supply-chain problems.
"The worsening supply situation is a concern for the outlook, especially in relation to prices," Chris Williamson, chief business economist at IHS Markit, said in a statement, adding that factories "appear to be struggling to boost operating capacity" amid a swelling backlog of orders.
The surge in activity and supply-chain pressures led input costs to climb at the fastest rate since 2008, according to Markit. Still, factories reported "markedly upbeat" expectations for the year ahead on hopes that an end to the pandemic and robust demand would drive further expansion.
Services reported similarly optimistic outlooks, according to the report. Businesses cited the easing of COVID-19 lockdowns as critical to boosting confidence.
Markit's report signals strong momentum seen throughout March will continue through spring. Indicators tracking the labor market, consumer spending, and sentiment all shot higher last month as the first moves toward a full reopening revived economic activity. Federal Reserve Chair Jerome Powell repeatedly characterized trends seen throughout March as marking an "inflection point" in the US recovery.
Still, supply strains hitting the manufacturing sector point to emerging risks. While the rate of private-sector inflation eased from March's pace, it still registered the second-fastest climb on record. Many businesses surveyed by Markit passed on the costs to their clients and consumers, according to the report.
The Fed has signaled that it will wait until inflation steadily trends above 2% before reining in its ultra-accommodative monetary policy. Yet with firms struggling to meet demand and supply chain disruptions lingering, inflation could outpace the central bank's outlook and place new pressure on the country just as it enters a new normal.
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