The US economy has shown resilience and defied expectations despite concerns of a potential slowdown. In May, the S&P Global’s Flash U.S. Composite PMI rose to 54.4 from 51.3 in April, exceeding economist predictions and reaching its highest level in 25 months.
The services sector played a significant role in driving this growth, with its component of the PMI rising to 54.8 from 54.2 in April. Manufacturing activity also showed positive movement, climbing to 50.9 from 50 in the previous month. These readings indicate expansion in both sectors, highlighting a robust turnaround in economic activity after a period of slower growth.
Despite other indicators suggesting a cooling economy, the latest PMI data point to another strong GDP gain in the second quarter. While the jobs report and initial GDP reading showed signs of slowing growth, the PMI figures have shifted market dynamics, leading to a downturn in stocks and a rise in the 10-year Treasury yield.
The surge in the services sector raises concerns about potential demand pressures that could complicate the Federal Reserve’s efforts to control inflation. Input prices continued to rise in May, with manufacturers facing the largest cost increases in 18 months, adding to the challenges faced by the Fed in reaching its inflation target.
In conclusion, while some may have predicted a slowdown for the US economy based on various indicators, recent data suggests otherwise as shown by S&P Global’s Flash U
