Business Activity Accelerates
...but underlying supply chain price pressures persist
Mobius Intel Brief:
Today’s flash S&P Global Purchasing Managers’ Index (PMI) data surprised markets to the upside. U.S. business activity grew at the strongest rate in over two years, and manufacturing activity extended its streak of expansionary prints to 5 months. The growth in manufacturing activity follows recent trends in U.S. distillate demand. Still, underlying price pressures persist in the industrial value chain, as manufacturers noted the largest increase in raw material input costs in 18 months. With firms passing those costs onto inflation-battered consumers in an elevated interest rate environment, today’s headline data carries a word of warning for energy and other commodity stakeholders.
Strong Headlines, Underlying Risks
U.S. business activity growth expanded at its fastest rate in over two years in May, according to S&P Global’s flash PMI data.
Services sector growth led the charge, jumping to 54.8 in May from 51.3 in April and notching a 16th consecutive month of readings above the critical 50 mark.
Manufacturing activity, meanwhile, surprised markets with an above-50 print at 50.9, extending its streak in expansionary territory to five months.
U.S. distillate demand, which has grown over 8.6% since mid-April, is an early directional indication of resilient industrial sector activity. Ongoing strength in industrial activity will support a bullish recovery in distillate consumption.
Still, today’s strong industrial headlines mask underlying risks for energy and commodity stakeholders.
Flash PMI data showed:
Keep reading with a 7-day free trial
Subscribe to Mobius Risk Group to keep reading this post and get 7 days of free access to the full post archives.