US business activity decelerates in April – PMI

The data released on Tuesday reveals a slowdown in U.S. business activity in April, reaching a four-month low due to weakened demand. However, there is a slight easing of inflation rates, providing potential relief as the Federal Reserve closely monitors economic indicators to manage inflation.

The S&P flash Composite PMI, which tracks both manufacturing and services, fell to 50.9 from 52.1 in March. Manufacturing activity slipped into contraction territory, with the flash manufacturing PMI declining to 49.9 from 51.9 in March. New orders decreased slightly, employment growth slowed, and signs of spare capacity in supply chains were observed. The flash services sector PMI also dropped to 50.9 in April from 51.7 the previous month.

The slowdown affects both manufacturing and services sectors, indicating a loss of momentum compared to the previous quarter. Economists predict a modest increase in GDP, likely around a 2.4% annualized rate for the last quarter.

Despite this deceleration, the U.S. economy is still performing better than other countries globally, even after significant interest rate hikes by the Federal Reserve since March 2022 to combat inflation. However, recent stronger-than-expected inflation and employment data have raised concerns at the Fed, prompting a reevaluation of its monetary policy stance.

The Federal Reserve is expected to keep its policy rate unchanged at the upcoming meeting, with recent data suggesting that monetary policy needs to remain restrictive for a longer period. The focus has shifted away from potential rate cuts to continued vigilance in managing inflationary pressures.