WASHINGTON, Feb 21 (Reuters) – Economic activity in the United States unexpectedly rebounded in February to its highest level in eight months, preliminary results from S&P Global’s monthly survey of chief executives show. purchases published on Tuesday.
The composite PMI, seen as a good barometer of economic activity, climbed to 50.2 in February from 46.8 in January, while economists polled by Reuters had forecast an average of 47.5.
This puts an end to seven consecutive months where the index had remained below the 50 threshold separating contraction and growth in activity.
The recovery in activity was supported by the services sector, while the manufacturing sector remained weak.
“Despite the unfavorable backdrop of rising interest rates and the tightening cost of living, business sentiment has improved amid signs that inflation has peaked and Recession risks have faded,” said Chris Williamson, chief economist at S&P Global Market Intelligence.
“At the same time, supply constraints have eased as delivery times for products entering factories are improving at a pace not seen since 2009,” he added.
In the services sector, the PMI index reached 50.5 in February against 46.8 in January and a consensus of 47.2.
The rebound in private sector activity confirms recent data on retail sales, the labor market and manufacturing production, which showed robustness suggesting good momentum in the economy since the beginning of the year.
RATES ARE GOING UP
The data has fueled the prospect of prolonged monetary tightening as the US Federal Reserve has since raised the fed funds target by 450 basis points since March, taking its key policy rate from near zero to a range of 4.50%-4.75%.
Markets are currently pricing in three more rate hikes in March, May and June of at least 25 basis points.
The flash composite index on new orders rose to 48.6 this month from 47.8 in January. According to S&P Global, “consumer hesitation, destocking and the impact of rising interest rates and inflation on spending” are cited as factors weighing on new orders.
With demand sluggish, inflation continued to decline: the sub-index of prices paid by businesses for incoming goods fell to 60.6 this month from 63.0 in January.
Activity in the manufacturing sector, for its part, came out at 47.8 against 46.9 the previous month and a forecast of 47.1. In this sector, orders remained subdued.
The services PMI came in at 50.5 from 46.8 in January, ending seven consecutive months of contraction.
On Wall Street, the three main stock indices increased their losses after the publication of this new data, the Dow Jones retreating by 1.35%, the S&P-500 by 1.26% and the Nasdaq by 1.54%.
On the bond market, the yield of ten-year Treasuries took nearly nine basis points, to 3.91%, and that of two years to nearly eight points, to 4.69%. (Report Lucia Mutikani; French version Claude Chendjou, edited by Kate Entringer)
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