US Business Activity Strengthens, Manufacturing Leading the Growth
US business activity accelerated in June 2026, supported by a surge in demand for manufactured goods. Preliminary data from S&P Global showed on Tuesday (June 23) that the composite PMI index rose to 52.2 from 51.5 in May, its highest level in five months. A reading above 50 indicates expansion, signaling that the US economy remains resilient despite the challenges of high prices, high interest rates, and the impact of the Middle East conflict.
The largest gains came from the manufacturing sector. The US manufacturing PMI rose to 55.7, its highest level since May 2022, while the manufacturing output index rose to 57.7, its highest in 59 months. Factories increased production to meet a surge in new orders, which grew at the strongest rate in more than four years. However, some of this demand was still driven by stockpiling as companies worried about supply disruptions and potential price increases due to the conflict in the Middle East.
The services sector also improved, although growth remained limited. The services activity index rose to 51.3, a four-month high. S&P Global noted that services activity was boosted by the World Cup, but demand remained restrained by persistently high prices, high interest rates, and low consumer confidence. This creates an unbalanced US economy: manufacturing is growing strongly, while services are still moving more slowly.
From the cost side, price pressures remain a concern. Input prices did rise at a slightly slower pace than the previous month, but remain at historically high levels. Supplier delivery times have also lengthened, indicating widespread supply chain disruptions. Consequently, many factories have increased raw material purchases and increased inventories, with input stocks rising at one of the fastest rates in the survey's history.
However, this data also contains negative signals from the labor market. Companies again cut headcount in June, both in the manufacturing and services sectors, due to high costs and the uncertain economic outlook. In the manufacturing sector, the decline in workforce was the deepest since the Covid-19 lockdowns in early 2020. This suggests that despite improving business activity, companies are still cautious about managing operating costs.
Looking ahead, this PMI data could strengthen market attention regarding the Federal Reserve's policy direction. Improving business activity could support the view that the US economy remains quite strong, but persistently high price pressures could keep the Fed hawkish. Investors will now be watching PCE inflation data for further clues. If inflation remains high, the US dollar could regain support, while gold and technology stocks could potentially remain under pressure. (arl)
Source: Newsmaker.id
