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.



Saudi Digital Payments Market Attracts Global Investments

Visitors to the Fintech 24 Conference in Riyadh (Photo: Turki Al-Aqili)
Visitors to the Fintech 24 Conference in Riyadh (Photo: Turki Al-Aqili)
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Saudi Digital Payments Market Attracts Global Investments

Visitors to the Fintech 24 Conference in Riyadh (Photo: Turki Al-Aqili)
Visitors to the Fintech 24 Conference in Riyadh (Photo: Turki Al-Aqili)

Saudi Arabia is pushing to increase digital payments to 70% by 2030, creating significant opportunities for global companies to expand in the region.
According to the Saudi Central Bank, electronic payments in the retail sector grew by 12% in 2023, reaching 70% of total transactions. Cashless transactions hit 10.8 billion, up from 8.7 billion in 2022, driving international companies to establish regional headquarters and capitalize on this growing market.
Nouf Al-Salama, Business Development Manager at PayerMax, told Asharq Al-Awsat that the company has opened a regional office in Saudi Arabia to strengthen its presence in the Middle East and North Africa (MENA) region.
She noted that the Gulf Cooperation Council (GCC) countries are expected to experience rapid growth in e-commerce, with Saudi Arabia and the UAE leading the change. According to CNNB Solutions, both countries are seeing a compound annual growth rate (CAGR) of 39% and 38%, respectively.
Federico Pienovi, Head of Commercial Operations for Asia, the Middle East, and Oceania at Argentine company Globant, revealed the company’s ambitions to generate $1 billion in revenue in the Saudi market over the next five years.
He said that Saudi Arabia has been selected as Globant’s regional headquarters, although the company is expanding across the region. With these ambitions, Globant plans to create over 500 local jobs in the coming years, continue its expansion, support national talents, and work on major projects that bring cutting-edge technology innovations to the Kingdom, he underlined.
Mordor Intelligence projects a 15.4% CAGR for Saudi Arabia's payment market between 2022 and 2027, making it one of the most advanced markets transitioning towards a cashless society.
PayerMax estimates the global digital payments market, valued at $7.79 trillion in 2022, will reach $14.77 trillion within five years, driven by the growth of digital wallets, smartphones, and payment technologies. Emerging economies’ rapid smartphone adoption is expected to further fuel this growth.