U.S. business activity crept up to a 26-month high in June amid a rebound in employment, but price pressures subsided considerably, offering hope that a recent slowdown in inflation was likely to be sustained, news reports cited recently.
MIDF Research, in it’s Economic Brief today (June 24), said they foresee the U.S Fed will approach interest rate cut carefully and likely maintain the high-for-longer stance.
Despite the continued resilience in the economy, MIDF opined the broad moderation in inflation provides a room for the Fed to begin cutting interest rates likely in the latter part of 2HCY24.
The US business activity grew faster in Jun-24 as shown by the provisional PMI readings.
The S&P Global Services PMI increased to 55.1 in Jun-24 (May-24: 54.8), the fastest expansion in 26 months and against market expectations for the index to fall to 53.7.
The manufacturing PMI also rose to 51.7 (May-24: 51.3), marking the fastest expansion in 3 months.
Both sectors reported growing output, with the services output growing at the strongest pace in over 2 years, while factory production expanded for the 5th consecutive month albeit slower than previous month.
Manufacturing jobs grew at the fastest rate in 21 months, reversing declines seen in previous months, while service sector employment increased for the first time in three months due to improved business confidence and rising demand.
Input prices rose at a slower pace, leading to a 5-month low in selling price inflation.
However, inflation rates remained above pre-pandemic averages, driven by higher raw material costs in manufacturing and wage growth in the service sector.
Optimism about future output edged up, with the service sector showing elevated levels of confidence due to expectations of lower interest rates and reduced cost-of-living pressures.
In contrast, manufacturing sentiment declined due to concerns over future demand and policy uncertainty.
The robust services sector and sustained expansion of the manufacturing sector indicated a better outlook for the US economy in 2QCY24.
