US Business Activity Growth Slows in February
Growth in U.S. business activity slowed in February, according to recent data from S&P Global. Despite the slowdown, U.S. stock index futures remained relatively stable. The report adds to a mixed economic picture, with the dollar concurrently poised for its largest weekly rise of the year.
- The slowdown to a 10-month low saw the S&P Global Flash U.S. Composite PMI Output Index fall to 52.3 in February from 53.0 in January; a reading above 50 still indicates expansion. This contrasts with the Eurozone, where business activity hit a three-month high, led by a manufacturing rebound that saw its PMI reach a 44-month high of 50.8. - Both the U.S. services and manufacturing sectors lost steam, with the Services PMI dropping to a 10-month low and the Manufacturing PMI hitting a seven-month low. Factors cited by S&P Global for the broad slowdown include weakened customer demand, high prices, tariffs, and adverse weather. - While the national picture softened in February, business activity in the Chicago area saw a major rebound in January, expanding for the first time in 25 months. The Chicago Business Barometer surged to 54.0, driven by a sharp increase in employment and new orders. - This economic cooling comes as the luxury sector anticipates a rebound; consulting firm Bain & Co. forecasts the personal luxury goods market will grow 3% to 5% in 2026 after a flat 2025. This follows a challenging period that has seen the luxury customer base shrink from 400 million in 2022 to 340 million in 2025. - Recent earnings from top luxury conglomerates reflect a mixed and cautious environment. LVMH noted a slowdown in Europe and weaker demand for cognac in its 2025 results, expressing a cautious outlook for 2026. - Kering, the parent company of Gucci, saw revenues fall 13% and net profit decline over 90% in 2025. In response, the group is rationalizing its retail footprint, having closed a net 75 stores in 2025 with plans for at least 100 more closures in 2026 to enhance brand exclusivity. - Inflationary pressures remain a key concern, as the S&P report noted the largest increase in average selling prices for goods and services since August of last year. This was driven by a seven-month high in services inflation, while manufacturing price increases actually moderated to a 14-month low. - Despite the February slowdown, American businesses expressed renewed optimism for the future. The report's index for year-ahead expectations jumped to its highest level in 13 months, suggesting companies may view the current weakness as temporary.
