For the first time since last October, S&P Global’s US manufacturing PMI for April is above 50 at 50.4 from 49.2 last month. The service component was up 1.1 pts m/o/m to 53.7. Combining the two has the composite index at 53.5 vs 52.3 last month and that is the highest since last May mostly because of the strength in services.
With services, S&P Global said it was helped by “greater employment and stronger demand.” New orders rose for a 2nd month helped by “Improved marketing initiatives, greater domestic demand and the acquisition of new customers.” Inflation pressures though rebounded as “the rate of cost inflation quickened in April. The pace of increase was sharper than the series average as companies noted that higher borrowing costs and general inflationary pressured added to business expenses.” The pass thru of those cost pressures picked up too “as firms responded to higher costs burdens by passing these through to customers where possible amid more accommodative demand conditions.” Employment picked up, with firms mentioning “that their ability to hire had improved.” Export orders though were under 50. The business outlook did rise though is “below the historic trend level” with “inflation and pressure on costs from rising interest rates” weighing on sentiment.
The manufacturing gain, while “marginal,” was “supported by stronger growth in output and employment, alongside a renewed rise in new orders.” The negative as “a further downturn in foreign client demand…as new export orders fell at a solid pace.” Prices paid and received rose here too, with “the pace of increase in operating expenses” the highest since last November and “firms were able to partly pass this through to customers, however, as selling prices increased at a sharp and historically elevated rate.” Supply constraints continue to ease. Employment rose as “Panelists stated that there was increased availability of candidates.” Backlogs remained below 50 but a bit less so. Business optimism rose here too about the future but also is below the “long run series average amid inflation worries and some concerns regarding a shift away from goods towards services among customers following the end of the pandemic.”
Bottom line, at least as measured by this diffusion index, the US economy continues to hang in there but price pressures, while definitely lessened, remains persistent. Services is pretty much where all the growth is coming from. This will clinch a rate hike in coming weeks, likely the last but I’ve said that before. Overall during the past few weeks with all the released economic data we can be even more confused about the US economic outlook.
Composite Index of Services and Manufacturing
END