U.S. private sector growth slows in June, flash manufacturing PMI drops to 52.1

Private sector companies in the U.S. saw a further strong growth in business activity in June; however, there was a loss of momentum since May. The seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index dropped to 53 in June from May’s 53.6. The latest reading hinted at the slowest upturn in business activity for three months.

Companies operating in both the service economy and manufacturing sector witnessed a slowdown in growth since May. The seasonally adjusted IHS Markit Flash Services PMI Business Activity Index eased to 53 in June from May’s 53.6, signalling the slowest upturn in service sector output since March. The data for June indicated towards a strong and accelerated rise in new business intakes throughout the service economy. The latest rise in new work was the most rapid since January that added to a further rebound in job creation from April’s low. In the meantime, service providers showed an upturn in their expectations for business activity in the next 12 months, with the degree of sentiment the most solid since January, noted IHS.

Input cost pressures deepened in June, which survey respondents have attributed to higher staff salaries and increasing raw material prices. Overall, the rate of input cost inflation was the most solid for two years. Attempts to ease pressures on margins resulted in a further strong rise in prices charged by service sector companies. The latest rise in output prices the most rapid rate seen since April 2015.

Meanwhile, the seasonally adjusted IHS Markit Flash Manufacturing PMI dropped to 52.1 in June from May’s 52.7. This indicated to the slowest rebound in overall business conditions since September 2016. The subdued reading of the manufacturing PMI print greatly shows the weaker rates of output and new business growth in June, which more than countered stronger contributions from job creation and inventory building.

In the meantime, the latest survey data showed a noticeable deceleration in input price inflation to its weakest since March 2016. Lower cost pressures resulted in a moderation in factory fate price inflation in June. The latest rise in manufacturers’ output charges was the least notable since September 2016.

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