WASHINGTON (Reuters) – U.S. business activity rose to a 13-month high in May, fueled by strong growth in the services sector, the latest sign that the economy picked up pace in the second quarter, despite rising risks of a recession.
S&P Global said Tuesday that its US Composite PMI Production Index, which tracks the manufacturing and services sectors, reached 54.5 for the month.
This is the highest level since April 2022 and follows the last reading of 53.4 in April. This was the fourth consecutive month the PMI was above 50, indicating growth in the private sector.
Survey data collected between May 12 and 22 was added to this month’s data, which showed the resilience of the labor market, with job growth accelerating in April and the unemployment rate declining. Unemployment up to a minimum of 3.4% for 53 years.
Retail sales excluding motor vehicles, gasoline, building materials and food services jumped strongly, while factory production and homebuilding improved.
The upbeat reports prompted the Atlanta Federal Reserve to raise its second-quarter GDP forecast to 2.9% annualized from 2.6%. The economy grew 1.1% in the first quarter.
Most economists forecast a recession in the second half of this year, citing the Federal Reserve’s 500 basis point rate hike from March 2022, when the central bank launches its sharpest monetary tightening since the 1980s to tame inflation. campaign was started.
The impasse over tightening credit conditions and raising the federal government’s borrowing limit has also raised recession risks.
The survey indicator on new orders received by private companies rose to 54.3 this month, the highest since last May, and from 51.9 in April.
The services sector boosted growth, keeping service inflation high. Price pressure on factories eased. The index of prices paid by companies for inputs fell to 58.5 from 61.2 in April.
“While manufacturing prices rose during the pandemic due to strong demand and deteriorating supply, it is now the service sector’s turn to raise prices amid resurgent demand and an inability to cope. Order intake due to capacity constraints,” Chris Williamson, said the chief economist at S&P Global Market Intelligence.
Companies also increased the number of employees, seeing that vacancies could be filled more easily.
The PMI index for the services sector rose to 55.1 from 53.6 in April, which is also the highest level in 13 months. Economists polled by Reuters had expected the services PMI to fall to 52.6.
The PMI Manufacturing Index fell to 48.5 from 50.2 in April. Economists had expected the index to remain at 50.
New orders fell after rising in April for the first time in six months, and manufacturers reported that customers were focusing on working out of current inventory. However, the makers were optimistic about the business conditions for the coming year.
A gauge of prices paid by factories for inputs fell below 50 for the first time in three years.