Investing.com - U.S. business activity improved to a two-month high in May despite companies having to contend with inflationary pressures stemming from President Donald Trump’s sweeping tariff agenda, a survey from S&P Global showed on Thursday.
S&P Global’s flash composite purchasing managers’ index came in at 52.1 for the month, compared to 50.6 in April. The 50-point level denotes expansion from contraction.
Activity in the services sector, which makes up a major bulk of the U.S. economy, edged up slightly to 52.3, versus a reading of 50.8 in the prior month. Economists had anticipated 51.0.
Manufacturing PMI, meanwhile, also rose to 52.3 from 50.2. Estimates had seen the figure sliding to 49.9.
Several firms have flagged that murkiness around Trump’s punishing tariffs has made planning out future investments more difficult, while surveys have pointed to a deterioration in consumer sentiment and an increase in inflation expectations.
Since Trump revealed his elevated tariffs on most countries at a much-anticipated "Liberation Day" event on April 2, the White House has partially delayed the levies until July in a bid to give U.S. officials more time to negotiate trade deals with individual countries.
Separately, the U.S. and China revealed a pause and lowering of their sky-high tit-for-tat tariffs earlier this month, further cooling concerns over a protracted trade spat between the world’s two largest economies. These tariffs are set to snap back in place in August.
Still, universal 10% tariffs and duties on items like steel, aluminum and auto parts remain in effect, while, by some calculations, the effective U.S. tariff rate now stands at its highest level since the 1930s.
“Business confidence has improved in May from the worrying slump seen in April, with gloom about prospects for the year ahead lifting somewhat thanks largely to the pause on higher rate tariffs," said S&P Global Chief Business Economist Chris Williamson in a statement.
"However, both sentiment and output growth remain relatively subdued, and at least some of the upturn in May can be linked to companies and their customers seeking to front-run further possible tariff-related issues, most notably the potential for future tariff hikes after the 90-day pause lapses in July."