The Fed may be scratching its head again based on US market sentiment

Output growth weakened in line with the drop in demand as new orders fell for the first time in six months, albeit modestly. The number of new deals fell both among manufacturers and service providers. Some operators said higher interest rates and high prices limited demand during the month, while manufacturers often attributed lower new orders to inflationary pressures, weak demand and sufficient inventory at customers.

International demand held up slightly better than domestic sales, new export orders remained unchanged for the second month running. Concerns about the ability to win new orders hurt companies’ expectations about the outlook for business activity for the year in April.

Business sentiment fell to five-month lows in both manufacturing and services, but remained positive overall amid hopes of improving market conditions.

Signs of weak demand affected US companies’ hiring plans at the start of the second quarter. Employment fell for the first time since June 2020, and the overall decline in the labor force was concentrated in the services sector. In fact – apart from the first wave of the Covid-19 pandemic –

the decrease in the number of people employed in services in April was the most marked since the end of 2009.

In contrast, manufacturing employment continued to grow modestly.

Manufacturing and raw material costs continued to rise sharply in April, although the rate of inflation moderated from the six-month peak in March. This was despite the fact that manufacturing input costs rose at their fastest pace in a year amid rising commodity prices. Providers often experienced higher labor and transportation costs, although they reported the second lowest overall cost increase in three and a half years.

In line with the input cost picture, output prices rose at a solid but slower pace in April, with price inflation in line with the series’ long-term average, although still high relative to pre-pandemic norms.

The S&P Global manufacturing bmi in April showed a value of 49.9, indicating broadly unchanged business conditions during the month. In April, American manufacturers reduced their purchase inventories for the second month in a row, and by a significant amount, which was the most marked since last August. However, companies have made some efforts to limit the pace of downsizing and have slightly increased their purchasing activity after a decline in the previous survey period. Finally, finished product stocks rose after the previous month’s decline,

reflecting a slowdown in demand that has caused companies to hold unsold goods.

Commenting on the data, Chris Williamson, chief business economist at S&P Global Market Intelligence, said: “The US economic recovery lost momentum early in the second quarter as respondents to the flash PMI survey reported below-trend growth in business activity in April. could lose pace as new business inflows fell for the first time in six months in April and firms’ future output expectations fell to a five-month low amid heightened concerns about the outlook”.

After the release of the data, the dollar continued to weaken against the euro.

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