New data from S&P Global has indicated that
the US economy is experiencing its biggest
upturn in almost a year. S&P Global's
preliminary reading on activity across the US
economy in April reached an 11-month high,
while the survey's reading on activity in the
services sector hit a 12-month high. These
findings challenge the narrative that "storm
clouds" are brewing in the US economy.
S&P's composite PMI reached 53.5 in April, up
from 52.3 in March, and the highest reading
since May 2022. For this index, any reading
above 50 indicates expansion in economic
activity, while readings below 50 indicate
contraction. The report's business activity
index for the services sector registered a
reading of 53.7, up from 52.6 last month, while
the manufacturing PMI came in at 50.4, up
from 49.2 in March.
Chris Williamson, Chief Business Economist at
S&P Global Market Intelligence, wrote, "the
latest survey adds to signs that business
activity has regained growth momentum after
contracting over the seven months to January.
The latest reading is indicative of GDP
growing at an annualized rate of just over 2%."
Williamson added that growth is broad-based,
led by services thanks to a post-pandemic shift
in spending away from goods, although goods
producers are also reporting signs of demand
picking up again. "Jobs growth has accelerated
alongside the resurgence of demand, aided by
reports of vacancies being more easily filled,
reflecting improved supply of candidates and
higher wages," he said.
However, recent data has led many economists
to continue to expect a downturn later this
year, with Oxford Economics' Lead US
Economist Oren Klachkin writing in a note to
clients that he expects a recession later in the
year. Furthermore, a survey conducted by
Bloomberg last month showed economists
placing a 65% chance on a downturn in the US
economy within the next 12 months.
JPMorgan's earnings release last week stated
that the economy "continues to be on
generally healthy footings," but CEO Jamie
Dimon added, "the storm clouds that we have
been monitoring for the past year remain on
the horizon, and the banking industry turmoil
adds to these risks."
In addition, disagreements in incoming data
have proven challenging, with readings on
activity from the New York Fed and
Philadelphia Fed signalling wildly different
outlooks on activity. The New York Fed's
measure of activity in the manufacturing
sector showed growth for the first time in five
months, whereas activity in the Philly Fed's
region fell to its lowest level since May 2020.
Ian Shepherdson, Chief Economist at
Pantheon Macroeconomics, wrote in a note to
clients that "we have no good reason to regard
one of these surveys as more reliable than the
other. Both are equally likely to be wrong, so
we will be watching the other regional Fed
manufacturing surveys released next week
closely."
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