With a resurgence in new orders for both the manufacturing and services sectors, business activity in the United States jumped back to its highest since early 2019 this month. This assumes significance because novel coronavirus cases are still on the rise in the US.
This data was revealed in a report of a purchasing managers’ survey published on Friday.
This month, the flash US Composite PMI Index of IHS Markit rose to a reading of 54, which was the highest for it since February 2019, said the data firm. The number in July was at 50.3.
The flash or the preliminary indicators of the index which represents the mood of the manufacturing sector was at its highest since January 2019 while that for services sector was at the highest since March 2019.
The index reading 50 or above is indicative of growth in private sector output.
With the rapid spread of the novel coronavirus pandemic throughout the United States resulting in widespread business shutdowns and stay-at-home orders, the US economy was pushed into recession in February.
“Driving the overall upturn in output was stronger client demand,” Markit said in its report. “Total new business rose for the first time since February and at a solid rate. Manufacturing firms registered a steeper expansion in new order inflows than in July, while service providers signaled a renewed increase in sales.”
The survey’s flash composite new orders index climbed to 54 in August – the highest since March 2019 – from a final reading of 49.7 in July.
Markit said in its report that the growth in foreign sales was the fastest since September 2014 with the reopening of more foreign markets all over the world.
This data comes at a time when there is still a continued increase in new coronavirus infections in the US which has resulted in shutting down of businesses again or pausing of reopening by some authorities in the hard-hit South and West regions this summer.
The unexpected and sudden spike in Markit’s indexes is however in line with the current choppy pattern of the US economic data according to which the recovery from the COVID-19 recession is fitful as there are both strengths and weakness in the US economy dotted across different portions of the economy and regions.
Compared to a reading of 50 in July, the services sector flash PMI of Markit increased to 54.8. A reading of 51 for the services sector was forecast by analysts and economists for the US economy. Services makes about one third of the total GSP of the US.
For a fourth straight month, there was growth in factory activity as the flash manufacturing PMI increased to 19-month high of 53.6 compared to a reading of 50.9 in July.
(Adapted from FinancialPost.com)