US Business Activity Reaches Highest Level in 27 Months

U.S. business activity rose to its highest level in 27 months in July, S&P Global said Wednesday (July 24).

Output has risen continuously for 1½ years. The pace of expansion slowed in April but has improved markedly since then, the company said in a Wednesday press release about its latest Flash U.S. Composite PMI (Purchasing Managers’ Index).

“The flash PMI data signal a ‘Goldilocks’ scenario at the start of the third quarter, with the economy growing at a robust pace while inflation moderates,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in the release.

There was a gap between sectors in July, though, as the service sector’s business activity increased to a 28-month high, while the manufacturing sector’s output dropped to a six-month low, according to the release.

“Some of the production decline was linked to staff shortages, so could prove temporary — something which is supported by the sector reporting improved confidence about future growth prospects,” Williamson said.

The latest flash estimate also found that employment rose for the second consecutive month, though the rate of growth slowed compared to June, according to the release.

Business confidence about output fell for a second consecutive month and remained below the survey’s long-run average, the release said. S&P Global attributed the drop to uncertainty ahead of the presidential election, while adding that companies express concern about inflation and interest rates.

The prices companies charged for both goods and services rose at one of the slowest rates seen in four years, which S&P Global said was due to competitive pressures.

At the same time, input prices rose, driven by increases in the cost of labor, raw materials, energy and logistics, per the release.

“These higher costs could feed through to higher selling prices if sustained, or cause a squeeze on margins,” Williamson said in the release.

The Bureau of Labor Statistics reported July 12 that the Producer Price Index (PPI), which measures wholesale prices, rose in June after seeing no change in May.

The PPI’s rise of 0.2% in June was greater than the 0.1% increase predicted by economists, CNBC reported at the time.