The US economy is growing at its fastest pace since April 2022.
That’s according to new data from S&P Global released Tuesday morning.
S&P Global’s preliminary US Composite PMI, which tracks activity in both the services and manufacturing sectors, rose to 54.5 in May from 53.4 in April and beat economists’ expectations of 53.0. It was the highest in 13 months for the index.
This increase was driven entirely by a rise in the services sector. The index rose to 55.1 this month from 53.6 in April, according to the S&P Report services division. However, manufacturing activity contracted in May, with the index hitting a two-month low of 48.5.
Any increase in these indices above 50 indicates an expansion in this sector. A reading less than 50 indicates shrinkage.
“The U.S. expansion picked up more momentum in May, but it’s clear that the dichotomy is growing,” said Chris Williamson, chief business economist at S&P Global Market Intelligence. .
“Firms in the service sector are enjoying a surge in post-pandemic demand, especially in travel and leisure, but manufacturing is shifting spending away from goods and toward services, resulting in overfilled warehouses and a shortage of new orders. are suffering from.”
Elsewhere on Tuesday, manufacturing data released by the Richmond Fed showed a contraction in May activity.
The S&P report said manufacturing demand weakened “significantly” in May, new orders fell for the first time in three months, and international sales fell to their weakest since May 2009 outside the initial pandemic-related decline. decreased significantly.
However, the S&P report showed that the labor market remains strong in both services and manufacturing. In the services sector, employment in May hit a 10-month high. On the manufacturing side, hiring this month was the strongest since September 2022.
Nonfarm payrolls totaled 253,000 in April, and the unemployment rate fell to 3.4%, the lowest since May 1969, according to the latest employment data. The May jobs report will be released on Friday, June 2nd.
And while these signs bode well for the health of the U.S. economy, they are potentially problematic for investors who hope a softening U.S. economy will prompt a moratorium on the Federal Reserve’s rate hike campaign. possible, which has pushed interest rates to all-time highs. 2007.
“Job growth is accelerating as service providers try to keep up with demand, but a tight labor market on the back of strong demand is a fuel for further inflationary pressure,” Williamson said. It will be,” he added.
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