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US Business Activity Surges, Signaling Economic Resilience Amid Labor Shortages

US business activity saw a notable expansion in January, achieving its strongest growth in seven months. The S&P Global flash composite output index exceeded expectations, reaching 52.3, compared to the anticipated 50.9. Both the manufacturing and services indices outperformed forecasts, registering at 50.3 and 52.9, respectively.


The composite index for new orders showcased the most robust growth observed in seven months, with the manufacturing sector leading the surge. Here, the volume of new orders soared to the highest level since May 2022.


Despite this growth, the increase in employment within the services and manufacturing sectors was moderate. Firms continued to face challenges in hiring skilled workers, a situation intensified by ongoing labor shortages.


Our Take: The US economy shows no signs of deceleration. Fed may appreciate the reduced price pressures, but the strong activity is not a reason to cut rates anytime soon. Is good economic news, bad for rates and risk again?


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