US manufacturing holds up as costs gauge hits four-year high

US manufacturing activity extended its expansion into April, but input cost pressures intensified sharply as geopolitical tensions in the Middle East disrupted supplies. Data and sector surveys indicate that firms are still producing at higher-than-seasonal levels even as their purchase prices have jumped.

The Institute for Supply Management (ISM) prices‑paid index rose markedly in April, climbing to 84.6 and marking a fourth consecutive monthly increase in input cost measures. S&P Global's flash manufacturing PMI also showed firmer activity, with the manufacturing reading at 54.0, while supplier delivery times and price measures reflected elevated inflationary pressure tied to higher energy and raw material costs.

Markets reacted to the cost shock: oil benchmarks gained on Iran-related supply concerns, safe-haven flows supported gold and pushed short-term yields around, and equity sector performance diverged as energy and commodity-linked stocks outperformed. Corporate earnings season will test whether companies can pass higher costs to customers without denting demand.

In a broader policy context, the Iran conflict's impact on shipping routes and commodity availability has fed through to producer prices and complicated the inflation outlook. That dynamic reduces central bank room for easing: the Fed may delay any planned rate cuts if input-driven inflation persists. Firms are responding by building inventories and adjusting purchasing strategies to guard against further disruption.

Analysts say manufacturing can remain in expansion while cost pressures last, but margins will be squeezed and price transmission to consumers is likely. Key near-term watchpoints include energy price paths, continued readings from ISM and private PMIs, and Fed communications; investors will also monitor which companies demonstrate pricing power and supply-chain resilience.