The US economy seems to be on track for another strong quarter of growth, according to new data released on Monday. The S&P Global’s flash US composite PMI, which looks at activity in both the services and manufacturing sectors, came in at 54.4 in September, slightly down from 54.6 in August. Despite this slight dip, economists had predicted a lower number at 54.3.
Chris Williamson, the chief business economist at S&P Global Market Intelligence, stated that the data indicates the US economy is heading towards “healthy” growth in the third quarter, which ends in September. He mentioned that the steady expansion of output suggested by the PMI aligns with an annualized GDP growth rate of 2.2% in the third quarter.
Following a positive update on retail sales in August, economists have been optimistic about the US economy’s performance in the third quarter. As of September 18, the Goldman Sachs economics team forecasted third-quarter GDP at 3%, while the Atlanta Fed’s GDPNow tool projected 2.9% annualized growth.
Federal Reserve Chair Jerome Powell also acknowledged the strong state of the economy as a reason for reducing interest rates and staying ahead of any potential issues. Powell emphasized that the US economy is growing well, with decreasing inflation and a robust labor market, and the goal is to maintain this momentum.
However, the latest S&P Global data revealed some signs of slowdown. The services component of the report showed a slight decrease from August to September, while manufacturing activity continued to decline, reaching a 15-month low. Additionally, prices charged rose at the fastest rate in six months, raising concerns about inflation.
Williamson highlighted that the weakened manufacturing sector and growing political uncertainty are posing challenges to the economy. He also mentioned that there is a reacceleration of inflation, indicating that the Federal Reserve cannot overlook its inflation target while focusing on sustaining economic growth.
Moreover, the survey’s future output index, which measures optimism about economic output in the coming year, hit its lowest level since October 2022. Williamson attributed this subdued sentiment to uncertainty surrounding the upcoming Presidential Election, which is affecting business decisions and investments.
In conclusion, while the US economy is showing signs of healthy growth, there are challenges ahead, particularly in the manufacturing sector and inflation. The upcoming Presidential Election and intensifying political uncertainty are contributing to a cautious outlook for the economy in the year ahead.