Morning Market Brief
Moderating demand in April helped slow business activity in the US to start the second quarter of 2024. Preliminary estimates show a slowdown in business activity in April, largely in response to a contraction in manufacturing sector activity. The slowdown in demand hindered employment growth, which fell over the month.
- A preliminary estimate showed the S&P Global US Composite Purchasing Managers Index fell to 50.9 in April from 52.1 in the previous month. This marked the slowest pace of business activity so far in 2024. (A reading above 50 denotes expansion.)
- Dragging down business activity was a slowdown in new orders, which declined for the first time since late 2023. Elevated inflationary pressures and high interest rates appeared to weigh on demand over the month. Given the fall in new orders, employment growth declined over the month.
- The critical manufacturing sector contracted in April. This was the sector’s first contraction since December 2023. The services sector expanded in April but at a slower pace than in March, reflecting weak demand amid tight financial conditions.
- US economic activity has been stronger than expected over the past several quarters. However, the slowdown in business activity in April puts the US economy on uncertain footing entering the second quarter. Any slowdown in economic activity could put the US Federal Reserve Board (Fed) on a path to begin lowering interest rates.
The data suggests tight financial conditions might be weighing on US economic activity. Particularly concerning was the drop in employment. The robust labour market has helped fuel the US consumer, and thus US economic conditions. But any slowdown in economic growth could push the Fed to begin cutting interest rates to help stimulate economic growth.
If you would like to discuss this economic and market update or have questions about your finances and investments, please feel free to contact me anytime.