US business activity stabilized in February. The service sector picked up. The economy is solid, suggesting that some pricing power is being maintained.
The preliminary PMI for the US manufacturing and services sectors, released by S&P Global, rose 3.4 points from the previous month to 50.2 in February. It was just above the 50 mark that separates activity from expansion to contraction, reaching an eight-month high.
US Composite PMI
Source: S&P Global
The employment sub-index of the headline index rose to a five-month high, suggesting continued strong demand for labor. Input cost growth slowed, but the sales price index hit a four-month high.
An index of future production rose to its highest level since May last year, suggesting growing optimism regarding demand.
Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “Despite headwinds from higher interest rates and a higher cost of living, inflation has peaked and signs of recession have receded. In addition, the mood at the company has brightened,” the statement explained. On the one hand, he wrote, he said, “the data underscore that the driver of inflation has shifted to wages in the context of a tight labor market.”
February’s service sector PMI showed the strongest increase in activity since June last year. An unusually warm winter is likely to have played a part. The manufacturing PMI contracted only slightly from the previous month.
Original title:US Business Activity Steadies, Boosted by Pickup in Services(excerpt)