US business activity expanded in January by the most in seven months, led by stronger orders growth that left service providers and manufacturers more confident about the demand outlook.

The S&P Global flash composite output index advanced to 52.3, fueled mainly by stronger services activity. Readings greater than 50 indicate expansion. The group’s measure of expected output in the coming year climbed to the highest since May 2022, boosted by firmer domestic demand.

“Confidence has also been buoyed by hopes of lower inflation in 2024, easing the cost of living squeeze and facilitating the path to lower interest rates,” Chris Williamson, chief business economist at S&P Global Market Intelligence, said in a statement.

In a welcome sign for Federal Reserve policymakers, the S&P Global measure of selling prices registered the weakest growth since May 2020, dragged down by service providers.

“With prices rising in January at the slowest rate since the initial pandemic lockdowns of early 2020, companies report that selling price inflation is now below the pre-pandemic average and consistent with consumer price inflation dropping below the Fed’s 2% target,” Williamson said.

An index of manufacturers’ selling prices, on the other hand, increased to the highest level since April as producers passed on higher transportation and fuel costs.

Delivery Times
Meantime, manufacturers also mentioned delays in deliveries because of shipping disruptions and winter storms. Supplier delivery times lengthened for the first time in more than a year and by the most since October 2022, according to S&P Global.

The composite measure of new orders showed the strongest growth in seven months. That was led by manufacturers, whose bookings climbed to the highest level since May 2022.

Employment growth at services and manufacturers moderated, with respondents indicating they’re still struggling to find skilled workers due to labor shortages.

This article was provided by Bloomberg News.