US business activity slowed in February and at the same time there was encouraging news on inflation, with a measure of prices paid for inputs falling to the lowest level in nearly 3-1/2 years. This may indirectly reduce concerns that price pressures are increasing.
S&P Global on Thursday reported that the US Composite PMI Output Index, which tracks the manufacturing and services sectors, slipped to 51.4 this month from 52.0 in January. A reading above 50 indicates expansion in the private sector.
The service sector contributed to the reduction in business activity. Manufacturing activity rose to a 17-month high.
The survey showed the economy continued to grow in the first quarter despite some weak January data, including retail sales, housing starts, and manufacturing output.
The S&P Global survey's measure of new orders received by private businesses slipped to 51.3 this month from 52.6 in January. A measure of prices paid for inputs fell to 55.0, the lowest level since October 2020, from 56.9 in January. Government data last week showed a larger-than-expected increase in consumer, producer and import prices in January, which most economists attributed to higher prices at the start of the year.
Financial markets have pushed back their expectations for the first interest rate cut from the Federal Reserve to June from May. Since March 2022, the US central bank has increased its key policy rate by 525 basis points to the current range of 5.25%-5.50%. A survey measure of sales prices rose in February.
Manufacturing activity picked up, with the manufacturing PMI reading rising to 51.5, the highest reading since September 2022, from 50.7 in the previous month. New orders increased along with employment, but the rate of increase in input prices continued to slow.
The survey's preliminary services sector PMI fell to 51.3 from 52.5 in the previous month. The components of new orders, employment, and input prices all declined.
