Business activity in the United States grew at its fastest pace in 13 months in May, driven by a strong rebound in the services sector.
The S&P Global U.S. Composite Purchasing Managers’ Index rose to 54.5 in May from 53.4 in April, topping economists’ expectations of 50.0. A reading above 50 indicates expansion.
The services sector, which accounts for the bulk of the U.S. economy, grew at its fastest pace since August 2021, with new business orders and employment rising sharply.
The manufacturing sector also expanded, but at a slower pace than the services sector. New orders and employment in manufacturing rose, but at a slower pace than in April.
The strong growth in business activity in May is a positive sign for the U.S. economy. However, there are some concerns that the economy may be overheating, which could lead to higher inflation.
Services Sector Drives Growth
The services sector, which accounts for the bulk of the U.S. economy, grew at its fastest pace since August 2021, with new business orders and employment rising sharply.
The index for new business orders rose to 56.6 in May from 53.9 in April, while the index for employment rose to 55.8 from 52.8.
The strong growth in new business orders suggests that demand for services remains strong. The increase in employment suggests that businesses are hiring to meet that demand.
Manufacturing Sector Slows
The manufacturing sector also expanded, but at a slower pace than the services sector. New orders and employment in manufacturing rose, but at a slower pace than in April.
The index for new orders rose to 54.6 in May from 56.1 in April, while the index for employment rose to 53.7 from 55.5.
The slower growth in the manufacturing sector is likely due to a number of factors, including supply chain disruptions and rising costs.
Inflation Concerns
The strong growth in business activity in May is a positive sign for the U.S. economy. However, there are some concerns that the economy may be overheating, which could lead to higher inflation.
The Federal Reserve is expected to raise interest rates in an effort to cool the economy and bring inflation under control. However, there are concerns that the Fed may raise rates too quickly, which could lead to a recession.
Only time will tell whether the U.S. economy can avoid a recession. However, the strong growth in business activity in May is a positive sign for the near term.
