U.S. factory activity rises to 4-year high as stocks build

U.S. manufacturing activity accelerated in May to its highest level in four years, according to new data, as businesses stockpiled goods in response to supply chain disruptions and rising prices linked to an ongoing conflict with Iran. The S&P Global flash manufacturing Purchasing Managers' Index rose to 55.3 this month from 54.5 in April, marking the strongest reading since May 2022. A figure above 50 indicates expansion.

The increase in factory activity was attributed to companies building safety stocks to guard against potential shortages. This activity offset a slight moderation in the services sector, where the flash PMI dipped to 50.9 from 51.0. The overall composite index, which tracks both manufacturing and services, remained unchanged at 51.7.

Economists said the nearly three-month-long conflict has disrupted shipping in the Strait of Hormuz, raising energy prices and straining global supply chains. This has contributed to shortages of goods including fertilizers, aluminum, and consumer products. Chris Williamson, chief business economist at S&P Global Market Intelligence, stated the composite reading suggests the economy will struggle to achieve annualized GDP growth...