US business activity tapered off to a four-month low due to softer demand in April, while inflation rates saw a slight decrease despite a notable rise in input costs. These shifts suggest potential relief ahead, aligning with the Federal Reserve's efforts to temper inflation by monitoring economic trends. According to Reuters citing S&P Global's latest report on Tuesday, the flash US Composite PMI Output Index, tracking both manufacturing and services, dipped to 50.9 from March's 52.1, indicating a slowdown in private sector expansion. This deceleration was evident across manufacturing and services, with both sectors experiencing growth at three- and five-month lows respectively. Consequently, employment, closely watched by the Fed, saw its first decline since June 2020, primarily in the services sector. The survey indicates a loss of momentum at the start of the second quarter compared to the preceding one. Economists polled by Reuters estimate a likely 2.4 per cent annualised GDP growth rate for the last quarter. Despite the Federal Reserve implementing 525 basis points of interest rate hikes since March 2022 to curb inflation, the US economy continues to outperform global counterparts. However, recent data, including robust inflation and employment figures, have given the Fed pause, suggesting a potential stall or reversal in its inflation-targeting efforts. The upcoming Fed meeting is anticipated to maintain the policy rate within the current range of 5.25-5.50 per cent. Last week, several Fed officials retreated from indicating a rate cut this year, emphasising the need for prolonged restrictive monetary policy. S&P Global's survey revealed a decline in new orders received by private businesses, alongside a moderation in input prices. While still robust, these indicators suggest a cooling of price pressures for both goods and services. In a shift from last year's trends, manufacturing input costs surged in April due to higher raw material and fuel prices, while service providers saw a comparatively modest increase in overall costs. Chris Williamson, chief business economist at S&P Global Market Intelligence, noted a decrease in future output expectations amid heightened economic uncertainty. Manufacturing slipped into contraction territory, with the flash manufacturing PMI dropping to 49.9 from March's 51.9. Meanwhile, the services sector also saw a slight decline, with the flash services sector PMI falling to 50.9 from the previous month's 51.7.
