With both ‘hard’ and ‘soft’ data declining rapidly recently, why should we be surprised that S&P Global’s preliminary PMI prints for May would suddenly surge, with manufacturing back into expansion?

Flash US Services Business Activity Index at 54.8 (April: 51.3). 12-month high.

Flash US Manufacturing PMI at 50.9 (April: 50.0). 2-month high.

Just ignore the plunge in hard data in May…

Source: Bloomberg

And just to rub salt into the wounds… S&P Global claims that US business activity accelerated in early May at the fastest pace in two years, largely reflecting stronger growth at service providers and accompanied by a pickup in inflation.

The S&P Global flash May composite purchasing managers index advanced by more than 3 points to 54.4, the highest since April 2022.

BUT…Selling price inflation has meanwhile ticked higher and continues to signal modestly above-target inflation.

“What’s interesting is that the main inflationary impetus is now coming from manufacturing rather than services, meaning rates of inflation for costs and selling prices are now somewhat elevated by pre-pandemic standards in both sectors to suggest that the final mile down to the Fed’s 2% target still seems elusive,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.

Factory input prices advanced at the fastest rate since November 2022, the report showed.

Prices-paid and received metrics for service providers also picked up.

Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“The US economic upturn has accelerated again after two months of slower growth, with the early PMI data signalling the fastest expansion for just over two years in May.

The data put the US economy back on course for another solid GDP gain in the second quarter. “

As solid as the 1.6% gain in Q1?

“Not only has output risen in response to renewed order book growth, but business confidence has lifted higher to signal brighter prospects for the year ahead.

However, companies remain cautious with respect to the economic outlook amid uncertainty over the future path of inflation and interest rates, and continue to cite worries over geopolitical instabilities and the presidential election.“

So while growth macro data is surprising to the downside, this survey says growth is killing it and Bidenomics rules!

Let’s see if this “good news” on growth prompts gains (or losses) in stocks.