May Sees A Pickup In US Corporate Activity And An Increase In Pricing Pressure


05/23/2024



Although May saw the fastest growth in U.S. business activity in just over two years, manufacturers reported a spike in input costs, indicating that products inflation may increase in the coming months.
 
The manufacturing and services sectors are tracked by S&P Global's flash U.S. Composite PMI Output Index, which increased to 54.4 this month, the company reported on Thursday. That came after a final reading of 51.3 in April and was the highest level since April 2022.
 
An increase in the private sector is indicated by a rating above 50. The indicator was expected to fluctuate slightly at 51.1 by economists surveyed by Reuters. The services sector was the main driver of the improvement, as the flash PMI increased from 51.3 in April to 54.8.
 
From 50.0 to 50.9, the manufacturing flash PMI increased somewhat.
 
If the increase in activity was to be believed, it would indicate that the second quarter's economic growth accelerated.
 
During the January–March quarter, the GDP grew at an annualised rate of 1.6%, mostly due to a spike in imports to keep up with the robust domestic demand.
 
Retail sales, housing starts, permits, and industrial production—so-called hard data—for April indicate that the economy lost further steam early in the second quarter. Additionally, the job market is slowing.
 
"Business confidence has lifted higher to signal brighter prospects for the year ahead," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "However, companies remain cautious with respect to the economic outlook amid uncertainty over the future path of inflation and interest rates, and continue to cite worries over geopolitical instabilities and the presidential election."
 
The measure of new orders received by private enterprises in the S&P Global survey went up to 51.7 this month from 49.1 in April. Its employment indicator shrank for a second consecutive month, but at a slower rate.
 
Companies had to deal with increased input costs. A wide range of inputs, including metals, chemicals, plastics, and timber-based goods, as well as energy and labour expenses, were reported to have increased supplier prices, which caused the manufacturing input prices index to soar to its highest level in 1.5 years. That would imply that the goods disinflation is almost at an end.
 
The cost of employment increased for service firms as well. Businesses aimed to raise selling prices in order to pass on increased expenses to customers.
 
"What's interesting is that the main inflationary impetus is now coming from manufacturing rather than services, meaning rates of inflation for costs and selling prices are now somewhat elevated by pre-pandemic standards in both sectors to suggest that the final mile down to the Federal Reserve's 2% target still seems elusive," said Williamson.
 
(Source:www.marketacreener.com)