MIXED SIGNALS In the United States at least though, the so-called hard data are increasingly painting a darker picture. The labor market is cooling, retail sales are declining and manufacturing output is slumping, leading most economists to forecast a recession as early as the second half of the year.
Banks have tightened lending, which could make credit less accessible to households and small businesses. The Institute for Supply Management surveys, which have a longer history, have suggested loss of momentum in the vast services sector in March and significant deterioration in manufacturing conditions. Still, inflation pressures, according to the surveys, continued to bubble. The U.S. survey's measure of new orders received by private businesses surged to 53.2 this month, also the highest reading since last May. The increase, which was across the services and manufacturing sectors, meant inflation pressures picked up this month. The survey's measure of prices paid by businesses for inputs also rose. "This increase helps explain why core inflation has proven stubbornly elevated at 5.6% and points to a possible upturn, or at least some stickiness, in consumer price inflation," said Chris Williamson, chief business economist at S&P Global Market Intelligence.
The Federal Reserve remains set to raise interest rates at its May 2-3 meeting but key data between now and then, particularly a survey of bank lending officers, may shape how policymakers weight the risks facing the economy and whether to pause further increases.
Both the Fed and the European Central Bank are struggling to get inflation anywhere near their 2% target. Likewise, the strong services performance in the Euro zone could mean that wage pressures continue in the region, complicating the ECB's efforts to tame inflation, some economists noted. Danske Bank's Piet Haines Christiansen said ECB policymakers would likely focus on the rise in services PMI "notably due to the close link to the wage dynamics" in a sector where wages represent some of the biggest costs. The ECB is expected to raise rates for a seventh straight meeting on May 4, with policymakers converging on a 25-basis-point hike even if a larger move is not yet off the table, sources with direct knowledge of the discussions have told Reuters. <^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^ Flash PMI PMI operating costs and inflation ^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^^> (Reporting by Lucia Mutikani, Jonathan Cable and Indradip Ghosh; Writing by Lindsay Dunsmuir; Editing by Hugh Lawson, Mark John, Christina Fincher and Andrea Ricci)
