US business activity slows in April; inflation measures show mixed results

U.S. Business Activity Cools in April, Inflation Eases

In a recent report by S&P Global, U.S. business activity in April cooled to a four-month low due to weaker demand, while rates of inflation eased slightly despite rising input prices. The report suggests a possible relief ahead as the Federal Reserve monitors the economy for signs of ebbing growth to bring inflation down further.

The Composite PMI Output Index, which tracks both the manufacturing and services sectors, fell to 50.9 this month from 52.1 in March, indicating a slowdown in private sector expansion. Both manufacturing and services sectors experienced weaker rates of growth, with employment falling for the first time since June 2020, particularly in the services sector.

The survey indicates a loss of momentum in the beginning of the second quarter compared to the previous quarter. Despite interest rate hikes by the Federal Reserve to combat inflation, the U.S. continues to outperform global peers.

The report also highlights a decline in new orders received by private businesses and a slight decrease in prices paid for inputs. Manufacturing input costs rose sharply in April, while service providers reported the second-lowest overall cost increase in three and a half years.

Chief Business Economist at S&P Global Market Intelligence, Chris Williamson, noted that the cooling of demand and labor market led to lower price pressures in April. Manufacturing entered contraction territory, with the flash manufacturing PMI slipping to 49.9, while the services sector PMI dipped to 50.9.

The Federal Reserve is expected to leave its policy rate unchanged at the upcoming meeting, as recent data suggests the need for continued restrictive monetary policy. The report reflects concerns about the economic outlook and future output expectations.