US Economy Gains Momentum with Growth in Service Providers

While growth in industry weakened, it picked up noticeably in service providers.

The US economy gained momentum in May. The purchasing managers’ index rose by 1.1 to 54.5 points, as the financial services provider S&P Global announced on Tuesday in its monthly company survey. This is the fourth rise in a row, taking the barometer to its highest level in over a year. It signals growth after 50.

While growth in industry weakened, it picked up noticeably in service providers. “It’s becoming clear that there’s a growing dichotomy,” said S&P Global chief economist Chris Williamson. The service providers enjoyed increasing demand after the end of the pandemic, especially in the areas of travel and leisure. “In contrast, manufacturers are struggling with overstocked warehouses and a lack of new orders,” Williamson said.

Most economists expect a recession in the world’s largest economy in the second half of this year. They point to the Federal Reserve’s rate hikes since March 2022, when the US Federal Reserve launched its fastest monetary tightening campaign since the 1980s. This is intended to combat inflation, but it also makes loans more expensive and slows down the economy.

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