Flash PMI survey data from Markit suggest the US economy could see GDP rise at an increased rate in the second quarter, but growth is clearly far more fragile than this time last year.
The seasonally adjusted Markit Flash US Composite PMI Output Index registered 51.7 in April, up from 51.3 in March to signal the fastest growth since January. A faster upturn in service sector activity (‘flash’ index at 52.1 in April) more than offset a near-stalling of manufacturing production growth (‘flash’ output index at 50.3).
The survey data suggest the economy grew at an annualised rate of just 0.8% at the start of the second quarter, only marginally above the pace signaled for the first quarter.
US ‘economic growth’ v Markit PMI
US services GDP v Markit PMI
* GDP in the two charts above is smoothed and converted into a monthly series by taking the mean of the current month and the preceding and following three month values.
Survey responses indicate that persistent weak demand from domestic and overseas customers, the struggling energy sector, the strong dollar and election worries are all eating into business optimism.
The current pace of growth is also only being supported by price reductions, as increasing number of firms offer discounts to win sales.
Job creation has meanwhile slowed as a result of cost-cutting pressures and uncertainty over the outlook, yet remains solid. The surveys point to another 150,000 non-farm payroll increase in April; a strong enough pace to help bring unemployment down. Robust, though slowing, service sector hiring continues to offset factory job losses.
US non-farm payrolls
Sources for charts: Markit, Datastream.
Service sector firms’ expectations for business activity growth during the next 12 months meanwhile picked up fractionally from March’s post-crisis low, remaining much weaker than the average since the survey began in late-2009 but at least moving in the right direction.
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