U.S. company activity was steady in March, but prices rose across the board, suggesting inflation could remain high after rising at the start of the year.
On Thursday, S&P Global said that its flash U.S. Composite PMI Output Index, which includes manufacturing and services, fell to 52.2 from 52.5 in February. A rating above 50 implies private sector growth. The slight slowdown reflected continuing services sector cooling.
Manufacturing hit a 21-month high. The survey indicates the economy started the first quarter on stable ground, while growth fell from the October-December period's 3.2% annualized rate. The US outperforms its global counterparts despite 525 basis points of Federal Reserve interest rate hikes since March 2022 to combat inflation.
On Wednesday, the U.S. central bank maintained its policy rate at 5.25%-5.50% but said it will cut it by three-quarters of a percentage point by year's end. The S&P Global survey of private business new orders fell to 52.1 from 52.3 in February.
From 55.5 in February, its input price index rose to 58.9, a six-month high. Output prices jumped to 56.8, the highest since April 2023, from 54.1 in February. Major price rises were in services. To keep inflation low, services price growth must decline when goods disinflation likely ends.
This month's input and output price increases suggested future inflation. Consumer prices rose sharply in the first two months of 2024. "Costs have increased due to wage growth and rising fuel prices, pushing overall selling price inflation for goods and services to its highest in nearly a year," said S&P Global Market Intelligence chief business economist Chris Williamson. "The steep jump in prices from the recent low seen in January hints at unwelcome upward pressure on consumer prices in the coming months."
This month, the survey's flash manufacturing PMI rose to 52.5, the highest since June 2022, from 52.2 in February. Despite slower order growth, employment rose and supply networks improved. Input costs climbed. S&P noted "anecdotal evidence suggested that inventories had been built to a level sufficient to support current workloads."
The flash services sector PMI fell from 52.3 to 51.7 in March. Employment remained steady but prices paid and input prices grew.
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