According to a recent survey, the pace of US business activity remained stable through January despite mixed economic signals. The S&P Global flash Composite Purchasing Managers’ Index (PMI), which assesses private sector output including manufacturing and services, edged slightly downward from 52.7 in December to 52.8 in January. A reading exceeding 50 denotes sector expansion, and the proximity to prior levels implies negligible changes in business conditions.
Both manufacturing and service sectors exhibited minimal fluctuations in their respective flash PMI readings, reflecting an environment of consistent, albeit moderate, growth. S&P Global characterized these results as indicative of a deceleration in overall economic growth as the calendar year turned.
Government data revealed robust economic expansion during the third quarter, with gross domestic product (GDP) growing at a 4.4% annualized rate. This performance was propelled by strong consumer spending and increased business investment in intellectual property, likely connected to advancements in artificial intelligence technology, alongside a narrowed trade deficit. Meanwhile, projections from the Atlanta Federal Reserve suggest GDP growth could accelerate to approximately 5.4% in the fourth quarter. However, the official GDP figures for this quarter remain pending, delayed by the prior government shutdown, and are scheduled for release on February 20.
The survey also highlighted stagnation in labor market conditions, with private sector employment PMI nudging slightly upward from 50.3 to 50.5. Sporadic reports of staffing difficulties were noted, potentially linked to immigration enforcement policies that may have curtailed labor supply, contributing to challenges in workforce expansion.
Inflationary pressures continued to weigh on businesses, reflected in price metrics that remained elevated. The price charged by companies for goods and services dipped marginally to 57.2 from 57.3, maintaining a level within the highest range of the preceding three years. Input costs, though moderated, also stayed at a heightened 59.7, down from 61.9 the previous month. These figures underscore persistent inflation risks, signaling that elevated prices could be a sustained feature in the near term.
The influence of tariffs imposed under the current administration was widely acknowledged as a significant factor driving cost increases across many sectors. Despite these added expenses, many firms have partially absorbed tariff impacts, mitigating the phenomenon of a sharp surge in inflation. Nonetheless, affordability and price-related concerns remain dominant issues among businesses.
Additional insights from the survey indicate that new orders experienced a growth, with the relevant index climbing to 52.2 from 50.8 in December. Conversely, export activity contracted to its lowest level in nine months, affected by declines in traded goods and services. This, coupled with heightened prices, geopolitical uncertainties, and federal policies, contributed to a slight downturn in overall business confidence, bringing it just below the average observed throughout the previous year.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, remarked on the persistent challenges faced by firms, highlighting the continuing impact of tariff-related cost increases as a central factor driving higher prices and reinforcing concerns around inflation and consumer affordability.