U.S. Business Activity Holds Steady in September, But Prices Rise - Is Inflation on the Horizon?
In September, U.S. business activity remained stable, but the average prices charged for goods and services saw the fastest increase in six months. This could potentially signal a pickup in inflation in the near future, according to S&P Global's latest report.
The flash U.S. Composite PMI Output Index, which monitors the manufacturing and services sectors, stayed relatively unchanged at 54.4 this month compared to 54.6 in August. A reading above 50 indicates expansion in the private sector.
Despite uncertainty surrounding the upcoming presidential election on Nov. 5, reports from various sectors, including retail sales, suggest that the economy is maintaining solid growth momentum in the third quarter. The services sector continued to expand steadily, while manufacturing saw a decline to a 15-month low.
Prices charged for goods and services rose at the quickest pace since March, with the survey's measure of prices paid by businesses for inputs hitting a one-year high. Rising costs, particularly in the services sector due to wage increases, were attributed to this acceleration.
However, there is evidence suggesting that inflation may be cooling. The labor market has slowed down this year, with the unemployment rate rising above 4.0%. The Federal Reserve's recent interest rate cut of 50 basis points to the 4.75%-5.00% range also reflects a commitment to sustaining a low unemployment rate.
Overall, the economy is still growing at a solid pace, but there are signs of a potential reacceleration of inflation. This indicates that the Fed may need to continue monitoring its inflation target while supporting the economic upturn.
The survey's measure of new orders received by private businesses fell slightly, and private sector employment levels remained weak. The flash manufacturing PMI dropped to a 15-month low, while the services PMI also saw a slight decrease.
Overall, the latest data suggests a mixed outlook for the U.S. economy, with potential inflationary pressures on the horizon. Investors and individuals should stay informed and monitor these developments closely to make informed decisions about their finances and investments.