Economy
US Business Activity Growth Cools as Manufacturing Weakens
US business activity expanded in early June at the slowest pace in three months, held back by a deeper contraction at factories.
The S&P Global flash June composite purchasing managers index fell 1.3 points to 53, the group reported Friday. Readings above 50 indicate growth.
The report offered mixed news on inflation. A gauge of factory input prices shrank the most in over three years while a similar measure for service providers climbed to a five-month high. However, the composite measure of prices received dropped to the lowest since 2020.
The group’s overall services gauge remained elevated on robust demand, which helped drive a measure of expectations to a more than one-year high.
Healthy demand for services stood in sharp contrast to a further deterioration at factories. The manufacturing gauge fell to a six-month low, with new orders matching the fastest rate of contraction since May 2020.
“Growth remains dependent on service sector spending,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement. “The question remains as to how resilient service sector growth can be in the face of the manufacturing decline and the lagged effect of prior rate hikes.”
In Europe, economic momentum nearly came to a halt in June, according to S&P Global data. A euro area purchasing managers index slid to a five-month low 50.3, led by France and Germany’s struggling factories.
The report showed the composite input-price index picked up from a month earlier, mainly due to wage pressures in the service sector.
At the same time, prices charged by service providers showed the slowest growth in five months and indicated respondents aren’t necessarily passing on all of those costs to consumers. That helped drag the composite measure of selling prices to the lowest level since October 2020.
Weighing firm demand and sticky price pressures in the service sector against cooling factory activity is a challenge facing the Federal Reserve when deciding the trajectory of monetary policy. Central bankers are expected to resume their tightening campaign soon after a brief pause this month.
“It is encouraging to see the overall rate of selling price inflation for goods and services drop to the lowest since late 2020 in a sign that the Fed is winning its fight against inflation,” said Williamson.
Firms ramped up hiring in early June as easing labor shortages allowed employers to fill long-held vacancies, according to the report. Increased hiring in the face of softer demand allowed respondents to clear some of their backlogs.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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