Americas

Americas

U.S. business activity still soft in early 2023, but outlook perks up

24 January 2023 19:35 (UTC +04:00)

U.S. business activity contracted for the seventh straight month in January, though the downturn moderated across both the manufacturing and services sectors for the first time since September and business confidence strengthened as the new year began, APA reports citing Reuters.

At the same time, however, a survey from S&P Global out Tuesday showed price pressures ticking higher for the first time since last spring, indicating that inflation is far from licked despite aggressive measures to contain it by the U.S. Federal Reserve. That lifts the odds the U.S. central bank may need to keep up the pressure through higher interest rates, including at next week's first policy meeting of the year.

S&P Global's Flash U.S. Composite Output Index rose to 46.6 in January - with readings below 50 indicating contraction in activity - from a final reading of 45.0 in December. While that was the highest in three months, companies still reported demand was soft and high inflation was a headwind to customer spending.

On the manufacturing side, S&P Global's flash Manufacturing PMI came in at 46.8 this month, up from 46.2 in December and exceeding the median estimate of 46.0 in a poll of economists by Reuters.

In the vast services sector, accounting for two-thirds of U.S. economic output, the pace of contraction moderated to 46.6 in January from 44.7 last month. That also exceeded the median estimate in the Reuters poll of 45.0.

Meanwhile, the survey's measures of input prices for both services firms and goods producers rose month-over-month for the first time since May.

“The worry is that, not only has the survey indicated a downturn in economic activity at the start of the year, but the rate of input cost inflation has accelerated into the new year, linked in part to upward wage pressures, which could encourage a further aggressive tightening of Fed policy despite rising recession risks,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.