U.S. Business Activity Rebounds To Eight-Month High In February-S&P Global Survey
U.S. business activity unexpectedly rebounded in February, reaching its highest level in eight months, according to a survey on February 21, which also showed inflation subsiding. S&P Global said its flash U.S. Composite PMI Output Index, which tracks the manufacturing and services sectors, increased to 50.2 this month from a final reading of 46.8 in January. That ended seven straight months of the index being below the 50 mark, which indicates contraction in the private sector. The services sector accounted for the rise in business activity, while manufacturing remained weak. Economists polled by Reuters had forecast the flash Composite PMI Output Index at 47.5.
"Despite headwinds from higher interest rates and the cost of living squeeze, the business mood has brightened amid signs that inflation has peaked and recession risks have faded," said Chris Williamson, chief business economist at S&P Global Market Intelligence. "At the same time, supply constraints have alleviated to the extent that delivery times for inputs into factories are improving at a rate not seen since 2009."
The rebound in business activity fits in with recent robust data on retail sales, the labor market and manufacturing production, which have suggested solid momentum in the economy at the start of the year. The strong reports have fanned fears that the Federal Reserve could maintain its interest rate hiking campaign through summer. The U.S. central bank has raised its policy rate by 450 basis points since last March from near zero to a 4.50%-4.75% range. Though two more rate hikes of 25 basis points are expected in March and May, financial markets are betting on another increase in June.
The flash composite new orders index rose to 48.6 this month from a final reading of 47.8 in January. According to S&P Global, "customer hesitancy, destocking and the impact of higher interest rates and inflation on spending" were cited as factors weighing on new orders. With demand lackluster, inflation continued to retreat. A measure of prices paid by businesses for inputs fell to 60.6 this month from a final reading of 63.0 in January.
Source: Reuters, 02.21.2023
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