Us Economic Output Reaches a Two-year High

The US economy is doing better than expected, even though there are worries about a possible slowdown. The S&P Global flash US composite PMI measures activity in both the services and manufacturing sectors. In May, it was recorded at 54.4, an increase from 51.3 in April. In May, economists predicted that the index would stay mostly the same. Instead, it reached its highest point in 25 months.

Both the services and manufacturing sectors were growing, but services were the main driver of growth for the composite index. The services part of S&P’s report indicated that the index increased to 54.8 this month, compared to 54.2 in April. The manufacturing activity increased to a reading of 50.9, up from 50 in April.

If the reading for these indexes is above 50, it means that there is expansion in the sector. If the reading is below 50, it means that there is contraction.

“The US economy is growing faster again after two months of slower growth. The early PMI data shows that the economy expanded at its fastest rate in over two years in May,” wrote Chris Williamson, the chief business economist at S&P Global Market Intelligence. “The data shows that the US economy is on track to have another strong increase in GDP during the second quarter.”

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Recent data has shown that the economy is slowing down. The April jobs report revealed that there were fewer new jobs created than anticipated, and the unemployment rate increased. Additionally, the initial estimate of the US economy’s growth in the first quarter of the year was lower than previously believed.

Overall, the market interpreted that data as a positive indication of the Fed’s efforts to combat inflation. On Thursday, the high PMI reading caused stocks to reach their lowest point of the day, while the 10-year Treasury yield (^TNX) increased by 3 basis points to reach 4.46%. The Russell 2000 (^RUT), which is affected by changes in interest rates, went down by over 0.5% after the report was released.

“Services” is a part of the economy that is affected by changes in interest rates. The increase in growth is a concern for the central bank because it indicates that there is increasing demand in the economy, which could lead to inflationary pressures,” Williamson explained to Yahoo Finance.

Williamson mentioned that the prices for inputs kept increasing in May. Manufacturers experienced the biggest increase in costs in a year and a half.

“Williamson said that achieving the target inflation of 2% is proving to be very frustrating.”

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