According to data from a purchasing managers index, business activity in the United States picked up in March. The S&P Global Flash Composite Output Index, which measures activity in the manufacturing and services sectors, rose to 53.3 in March from 50.1 in February, marking the highest level since May last year.
The uptick in activity was primarily driven by the services sector, which saw a renewed demand for service providers. Orders for the sector increased for the first time since September, with the flash US services PMI rising to 53.8 from 50.6. This is the highest reading in 11 months and suggests that the services sector is beginning to recover from the pandemic-induced slowdown.
Meanwhile, the US manufacturing PMI also rose to 49.3 from 47.3, surpassing economists’ expectations of 47.0 and reaching the highest level in five months. This indicates that the manufacturing sector is also beginning to recover, although it is still in contraction territory.
The data from the purchasing managers index is encouraging, as it suggests that the US economy is starting to recover from the COVID-19 pandemic. The services sector is crucial for the US economy, as it accounts for a significant portion of the country’s GDP. However, it is essential to note that the recovery is still uneven, and some sectors, such as manufacturing, struggle.
Overall, the data provide hope for the US economy and suggests that the worst of the pandemic-induced downturn may be behind us. However, it is essential to remain vigilant, as the situation is still evolving, and many uncertainties are ahead.
According to the survey, job creation in the US private sector also picked up in March, with the pace of growth hitting a six-month high. The increase in employment was primarily driven by the services sector, which added jobs at the fastest rate in a year. In contrast, the manufacturing sector continued to see a decline in employment.
Despite the positive trend in business activity and job creation, concerns over inflation remain. The survey showed that input prices rose fastest in over nine years, driven by rising fuel, materials, and transport costs. In response to the increased costs, businesses raised their prices at the fastest pace in almost seven years.
The price rise has been attributed to a combination of factors, including supply chain disruptions, increasing demand as economies reopen, and massive fiscal and monetary stimulus effects. The Federal Reserve has indicated that it expects the rise in inflation to be temporary. Still, many economists are keeping a close eye on the situation, noting that sustained high inflation could lead to policy tightening by the central bank.
Overall, the purchasing managers index data suggests that the US economy is continuing to recover from the effects of the COVID-19 pandemic, with business activity and job creation increasing. However, concerns over inflation could challenge the recovery in the coming months, and policymakers will need to carefully balance the need for continued support with the risks of overheating the economy.