US Business Activity Sees Notable Increase
Recent data from S&P Global’s Flash Purchasing Managers’ Index indicates that US business activity has picked up, reaching its highest rate since March.
The headline composite PMI output index rose from 50.6 in May to 52.1, marking a two-month peak. Analysts from the Wall Street Journal had anticipated a contraction in manufacturing, forecasting a decline to 49.8, while services increased to 50.6, slightly surpassing expectations. Notably, the manufacturing PMI surged to 52.3, as did the Service Business Activity Index, reflecting newfound vigor in both sectors.
Chris Williamson, S&P Global’s chief business economist, commented, “The rising demand suggests that the economy has more momentum than expected.” He noted that production growth has rebounded from a recent low observed in April.
Domestic demand has surged, with new manufacturing orders increasing at the fastest rate in 15 months. Additionally, activity in the services sector has bounced back from a 17-month low last month. However, export orders are still on the decline, particularly in services, where foreign demand has sharply decreased since early 2020.
Yet, the report also highlighted some cautionary signs. Prices for goods and services are climbing at the fastest rate since August 2022, influenced by rising tariff-related costs and suppliers passing on expenses. Manufacturers are reportedly stockpiling inputs at an unprecedented pace, bracing for uncertainty once the current 90-day tariff suspension comes to an end in July.
Williamson added, “At least some of May’s data can be linked to businesses and their customers who are scanning for issues that could lead to potential tariff hikes following the 90-day suspension in September.” Jobs were slightly cut in May, with both manufacturers and service providers reducing payrolls amid rising costs and an ongoing labor shortage. However, business confidence has risen from its low in April, buoyed by hopes of a new tariff suspension and increased production activities.
The Flash PMI data is derived from survey responses collected between May 12 and May 21. Final figures will be released on June 2 for manufacturing and June 4 for services and composite indexes.
