US Business Activity Inches up in June; Price Pressures Abating

A worker assembles parts of a Tundra Truck at Toyota's truck plant in San Antonio, Texas, US, April 17, 2023. (Reuters)
A worker assembles parts of a Tundra Truck at Toyota's truck plant in San Antonio, Texas, US, April 17, 2023. (Reuters)
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US Business Activity Inches up in June; Price Pressures Abating

A worker assembles parts of a Tundra Truck at Toyota's truck plant in San Antonio, Texas, US, April 17, 2023. (Reuters)
A worker assembles parts of a Tundra Truck at Toyota's truck plant in San Antonio, Texas, US, April 17, 2023. (Reuters)

US business activity crept up to a 26-month high in June amid a rebound in employment, but price pressures subsided considerably, offering hope that a recent slowdown in inflation was likely to be sustained.

S&P Global said on Friday that its flash US Composite PMI Output Index, which tracks the manufacturing and services sectors, nudged up to 54.6 this month.

That was the highest level since April 2022 and followed a final reading of 54.5 in May. A reading above 50 indicates expansion in the private sector. Both the services and manufacturing sectors contributed to the gain in activity.

The elevated composite PMI reading suggests that the economy ended the second quarter on a solid note. So-called hard data, however, paint a different picture. Retail sales barely rose in May after falling in April. Housing starts extended their decline, hitting the lowest level in nearly four years in May.

The economy is slowing following 525 basis points worth of interest rate hikes from the Federal Reserve since 2022 to tame inflation. The loss of momentum together with easing inflation pressures are keeping a rate cut this year on the table.

The US central bank has maintained its benchmark overnight interest rate in the current 5.25%-5.50% range since last July.

The S&P Global survey's measure of new orders received by private businesses increased to 53.4 this month from 51.7 in May.

Its measure of employment rose for the first time in three months amid what S&P Global said was "improved business confidence for the year ahead" as well as "renewed pressure on operating capacity from rising demand."

The drop in the prior months had raised fears among some economists of a looming sharp slowdown in job growth. So far the labor market has continued to churn out jobs at a solid clip.

The pace of increase in input prices slowed as did the rate at which businesses are raising prices for goods and services.

The prices paid for inputs measure dropped to 56.6 from 57.2 in May. The output prices gauge fell to a five-month low of 53.5 from 54.3 in May. The moderation was in both manufacturing and the services sector, where the rise was among the slowest over the past four years.

"Historical comparisons indicate that the latest decline brings the survey's price gauge into line with the Fed's 2% inflation target," said Chris Williamson, chief business Economist at S&P Global Market Intelligence.

Inflation moderated in May, with the consumer price index unchanged for the first time in nearly two years.

The survey's flash manufacturing PMI edged up to 51.7 this month from 51.3 in May. Economists polled by Reuters had forecast the index for the sector, which accounts for 10.4% of the economy, dipping to 51.

S&P Global said "manufacturers' commonly cited concerns over the demand environment in the months ahead as well as election-related uncertainty, notably relating to policy."

Its flash services PMI increased to 55.1, a 26-month high, from 54.8 in May. That exceeded economists' expectations for a reading of 53.7.



Gold Eyes Best Quarter in over Eight Years

A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
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Gold Eyes Best Quarter in over Eight Years

A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)
A participant shows gold bars during the 21st edition of the international gold and jewelry exhibition at the Kuwait International Fairgrounds in Kuwait City on May 23, 2024. (Photo by Yasser AL ZAYYAT / AFP)

Gold halted its record run on Friday but remained on track for its best quarter since 2016 after a rally catalysed by an outsized US Federal Reserve interest rate cut, while markets braced themselves for a crucial inflation report due later in the day.

Spot gold was down 0.1% at $2,666.50 per ounce as of 1115 GMT, below the all-time peak of $2,685.42 hit in the previous session. It is heading for its best quarter since the first three months of 2016.

US gold futures fell 0.2% to $2,688.90, Reuters reported.

"The market at this point in time has priced in all the good news and there's also some hesitancy from fresh buyers to get involved at these record high levels," said Ole Hansen, head of commodity strategy at Saxo Bank.

Bullion has risen 29% so far this year, hitting successive record peaks after last week's half-percentage-point cut by the Federal Reserve and the stimulus measures announced by China earlier this week.

Silver prices surged, tracking bullion's strong performance, though some analysts warn that the rally may fade.

"Overall, industrial demand is still supportive for silver. But we need to have a stronger economic performance in China as well as in other developed countries," said ANZ commodity strategist Soni Kumari.

The surge in silver prices is more a spillover impact from gold, Kumari said.

Spot silver eased 0.1% to $31.98 per ounce, after hitting its highest since December 2012 at $32.71 on Thursday. It is set for a third straight week of gains.

"I do believe silver will continue to outperform gold. But as we all know, wherever gold goes, silver tends to go, but faster," Hansen added.

Both gold and silver serve as safe-haven investments, but the latter has more industrial applications, so tends to underperform during recessions and outperform when economies expand.

Inflows into gold exchange-traded funds, particularly from Western investors, are set to rise in coming months, adding yet more positive stimulus for already record high bullion prices. Some banks expect gold to rise towards $3,000.

In other metals, platinum was up 0.5% at $1,012.40 but palladium fell nearly 1.5% to $1,031.75.