U.S. business activity reached a 27-month high in July, according to the S&P Global flash U.S. Composite PMI Output Index, which rose to 55.0, the highest since April 2022. This growth was driven by a robust services sector, which offset a slowdown in manufacturing. However, businesses faced challenges in sustaining higher prices for goods and services, indicating resistance from consumers and signaling a potential easing of inflation pressures.
Average prices for goods and services increased at their slowest pace since January, aligning with the Federal Reserve’s 2% inflation target. This trend was supported by reports of consumers pushing back against price increases, suggesting a downward trend in inflation. The steady rise in the composite PMI indicates that economic activity remained strong at the start of the third quarter, with expectations for the government to report a 2.0% annualized GDP growth rate for the second quarter.
Despite the overall positive outlook, private sector employment growth slowed in both manufacturing and services sectors. The flash manufacturing PMI dropped to 49.5, a seven-month low, while the flash services PMI increased to 56.0, a 28-month high. Concerns about future sentiment were noted, particularly due to uncertainties surrounding the upcoming presidential election and its potential impact on policies.
