The growth of the U.S. economy accelerated in March, with business surveys indicating the fastest uptick in growth since May of last year, S&P Global said Friday.
Unfortunately, higher inflation accompanied the faster pace of growth.
The S&P Global Flash U.S. services-sector index rose to an 11-month high of 53.8 from 50.5 in the prior month. This was well above the consensus forecast for a reading of 50.3, indicating that economists have underestimated the strength of the services side of the economy.
The S&P Global U.S. manufacturing sector index, meanwhile, increased to 49.3 from 47.3. That’s the best reading in five months, although it is still below the 50 threshold that divides expansions and contractions. Economists had forecast this to drop down to 47.2.
The surveys, which are taken from executives inside U.S. companies known as purchasing managers, are considered to be some of the earliest indicators of economic developments. The surveys are often referred to as PMIs, short for purchasing manager index.
“March has so far witnessed an encouraging resurgence of economic growth, with the business surveys indicating an acceleration of output to the fastest since May of last year,” said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence. “The PMI is broadly consistent with annualized GDP growth approaching 2%, painting a far more positive picture of economic resilience than the declines seen throughout the second half of last year and at the start of 2023.”
Manufacturing is still struggling. New orders fell again but at the slowest pace in six months, suggesting that these could be reaching their nadir. Production increased for the first time since last September, a development Williamson said was based on a marked improvement in supply chains.
New orders for services rose for the first time since September.
The labor market remains incredibly strong. Employment rose at both service companies and manufacturers. The rate of total job creation was the fastest for six months, as companies added to staffing numbers in response to increased new orders.
“On the price front, input costs faced by businesses continued to rise at a historically elevated pace in March despite the rate of inflation softening to the second-slowest since October 2020. Although raw material and supplier price hikes had eased, firms stated that greater wage bills pushed up cost burdens,” S&P Global said.
Selling prices increased, especially on the services side where businesses reported that “more accommodative demand conditions allowed them to pass-through higher cost burdens.” The rate of price inflation was the fastest in five months, S&P Global said.
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