Businesses worldwide experienced improved performance this month, with heightened activity in the United States, Asia, and Europe, as per Thursday's surveys. This may allow central banks to delay interest rate cuts.
Borrowing costs had risen due to the Covid-19 pandemic to curb inflation, but the focus has now shifted to when and by how much rates will decrease, especially in countries holding elections this year. India is currently conducting elections, the United States will hold elections in November, and British Prime Minister Rishi Sunak has called for a national election on July 4.
Despite earlier predictions of a slowdown, a Reuters poll of economists in April suggests that the global economy is likely to maintain its strong momentum throughout the year and into 2025, with a higher likelihood of robust growth than weakness.
In May, US business activity surged to its highest level in over two years, indicating a pickup in economic growth in the second quarter. The flash US Composite PMI Output Index reached 54.4 this month, the highest level since April 2022, driven by the services sector.
S&P Global also reported that the European activity expanded at its fastest pace in a year, with the preliminary composite Purchasing Managers’ Index climbing to 52.3 this month, potentially leading to policy easing from the European Central Bank.
Germany’s headline PMI remained above 50 for a second consecutive month, while in France, the private sector unexpectedly shrank this month after expanding in April.
Business activity in India, Japan, and Australia also demonstrated varying trends this month, according to respective PMI reports.
