US business activity downturn eases slightly
NEW YORK/LONDON - The downturn in US business activity eased slightly in January even as it contracted for the seventh straight month while euro zone business activity made a surprise return to modest growth, as two of the world’s major economies hope to avert recession this year, surveys showed on Tuesday.
S&P Global said its flash US Composite PMI Output Index, which tracks the manufacturing and services sectors, rose to 46.6 this month from a final reading of 45.0 in December, the first moderation since September but still well below a key reading of 50 used to separate contraction and growth in the private sector.
The Federal Reserve’s fastest interest rate hiking cycle since the early 1980s has weighed on demand in the world’s largest economy as central bankers around the world try to rein in high inflation.
But in a worrisome sign, the survey’s measures of input prices for both US services firms and goods producers rose month-overmonth for the first time since last May, suggesting the US central bank may need to keep up the pressure through higher interest rates to bring inflation back to its 2 per cent target.
“The worry is that... the rate of input cost inflation has accelerated into the new year, linked in part to upward wage pressures, which could encourage a further aggressive tightening of Fed policy despite rising recession risks,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.
The Fed is primed for a 25 basis increase at its policy meeting next week but has been eyeing a stopping point in its current hiking cycle this spring, to better balance the risk of bringing down inflation without tipping theconomy into recession.