The payment: The US economy accelerated in March, S&P Global surveys showed, but so did inflation as companies hiked selling prices.
The S&P Global Flash US services index rose to an 11-month high of 53.8 from 50.5 the previous month. Most Americans are employed on the services side of the economy.
Meanwhile, the S&P Global Index of US manufacturing rose to 49.3 from 47.3. That’s a five-month high.
Any number above 50 indicates expansion. The numbers below signal a contraction.
S&P Global surveys are among the first indicators each month to assess the health of the economy.
Key data: New orders, a sign of future sales, rose for the first time since last September at service-oriented companies.
Bookings at manufacturers fell again, but at the slowest rate in six months. On a more positive note, production rose for the first time since last September.
Employment rose across the economy as both service firms and manufacturers said they hired new workers.
On the other hand, the increase in demand allowed companies to raise prices as quickly as possible in five months.
Business leaders said rising costs, particularly labor costs, contributed to their decision to raise prices.
That’s bad news for Federal Reserve officials, who fear rising wages could make it harder to contain high inflation.
Big picture: The service and industrial sides of the economies follow different trajectories.
Americans spend relatively more money on services like travel and food and less on goods. As a result, service companies are still hiring faster and growing faster.
Manufacturers are basically standing still due to the change in consumer behavior and the depressing effects of higher inflation and interest rates.
Overall, however, the S&P reports paint a picture of an expanding economy that is not on the doorstep of a recession.
It remains to be seen how much the recent tensions in the banking sector will affect lending and make it harder for companies to borrow and invest.
Looking ahead: “March so far has witnessed an encouraging rebound in economic growth,” said Chris Williamson, chief operating officer at S&P Global.
“There are also some concerns about inflation,” he said. “The inflationary rebound is now being led by stronger price increases in the services sector, largely associated with faster wage growth.”
Market reaction: The Dow Jones Industrial Average
DJIA
and S&P500
SPX
fell in Friday trading.
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