US economy has 'regained growth momentum' in April as recession fears swirl
The US economy is in the midst of its biggest upturn in nearly a year, according to new data.
The US economy is in the midst of its biggest upturn in nearly a year, according to new data from S&P Global out Friday.
S&P Global's preliminary reading on activity across the US economy in April reached an 11-month high, while the survey's reading on activity in the services sector hit a 12-month high. The report comes as a challenge to the narrative that "storm clouds" are brewing in the US economy.
"The latest survey adds to signs that business activity has regained growth momentum after contracting over the seven months to January," wrote Chris Williamson, chief business economist at S&P Global Market Intelligence. "The latest reading is indicative of GDP growing at an annualized rate of just over 2%."
In April, S&P's composite PMI reached 53.5, up from 52.3 in March and the highest reading since May 2022, the company said in a release. For this index, any reading above 50 indicates expansion in economic activity, while readings below 50 indicate contraction.
For the services sector, S&P's business activity index registered a reading of 53.7, up from 52.6 last month, while the report's manufacturing PMI came in at 50.4, up from 49.2 in March. Friday's reading marked a six-month high for S&P's manufacturing gauge.
"Growth is also reassuringly broad-based, led by services thanks to a post-pandemic shift in spending away from goods, though goods producers are also reporting signs of demand picking up again," Williamson added.
"Jobs growth has accelerated alongside the resurgence of demand, aided by reports of vacancies being more easily filled, reflecting improved supply of candidates and higher wages."
Friday's report comes less than two weeks before the Federal Reserve's latest policy meeting, which is expected to see the central bank raise interest rates by another 0.25%.
Earlier this week, the Fed's Beige Book report, which gathers anecdotes from business contacts across the country, showed economic activity remained steady in recent weeks despite concerns about the banking sector that rattled markets in March.
Credit standards, however, did tighten in the wake of Silicon Valley Bank's failure in early March. And recent data has led many economists to continue to expect a downturn later this year.
Last week, data on retail sales, industrial production, and initial jobless claims prompted Oren Klachkin, lead US economist at Oxford Economics, to write in a note to clients that he expects a recession later in the year.
"We believe Q1 will end up being the best quarter this year for the economy as tighter credit conditions and elevated interest rates slow GDP growth to a crawl in Q2 and spark a recession in the second half of the year," he wrote.
In JPMorgan's (JPM) earnings release last Friday, CEO Jamie Dimon said the economy "continues to be on generally healthy footings" but added, "the storm clouds that we have been monitoring for the past year remain on the horizon, and the banking industry turmoil adds to these risks."
A survey conducted by Bloomberg last month showed economists placing a 65% chance on a downturn in the US economy within the next 12 months.
An upturn to start the first month of the second quarter perhaps offers a new challenge to this forecast.
Disagreements in incoming data, however, continue to prove a challenge.
Just this week, readings on activity from the New York Fed and Philadelphia Fed — whose regions are adjacent to one another and include different parts of the same state, New Jersey — signaled wildly different outlooks on activity.
The New York Fed's measure of activity in the manufacturing sector showed growth for the first time in five months.
In the Philly Fed's region, activity fell to its lowest level since May 2020.
"We have no good reason to regard one of these surveys as more reliable than the other," wrote Ian Shepherdson, chief economist at Pantheon Macroeconomics, in a note to clients on Friday. "Both are equally likely to be wrong, so we will be watching the other regional Fed manufacturing surveys released next week closely."
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