The latest Purchasing Managers' Index (PMI) survey from S&P Global showed Tuesday that business activity in the United States reached its highest level in 13 months in May, rising to 54.5 and indicating expansion, although the gap between manufacturing and services continues to widen.
"The U.S. economic expansion gathered further momentum in May, but an increasing dichotomy is evident," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Post-pandemic demand for travel and leisure is up, but manufacturers are dealing with overstocked warehouses and fewer orders as spending shifts from commodities to services, causing a change in inflation dynamics, Williamson said.
What You Need To Know About The Most Recent PMI Readings
- The S&P Global US Composite PMI increased to 54.5 in May 2023, up from 53.4 the previous month and much higher than the 50 predicted, representing the private sector's highest rate of expansion since April 2022.
- The S&P Global US Services PMI rose from 53.6 in April to 55.1 in May, above market estimates of 52.6.
- Services activity grew at its quickest pace in almost a year, with companies attributing the increase to higher customer demand. Also, the pace of job creation was the strongest in the last 10 months, while both input and output prices rose above their average.
- The May S&P Global Flash US Manufacturing PMI was 48.5, down from 50.2 in April and below the expected 50.
- New orders fell the fastest in three months as demand decreased. Still, employment rose the most since September given greater availability of workers.
- As input demand dropped, supplier delivery times improved the most on record, while input prices fell for the first time since May 2020.
Market Reactions:
The stock market is volatile Tuesday, with the S&P 500, which is tracked by the SPDR S&P 500 ETF Trust SPY down 0.3% for the day, and the QQQ Invesco Trust QQQ down 0.4%.
Read next: Escalating US Treasury Yields Reflect Intensifying Uncertainty Over Debt Ceiling Negotiations
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