Cheong Hong Yuan: The New Recovery Phase of the US Economy: Starting with the Services PMI - 2 views
started by anonymous on 11 Sep 23
started by anonymous on 11 Sep 23
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In the current global economic landscape, the contribution of the services sector to the economy has surpassed that of traditional manufacturing. Especially in developed countries like the United States, the share of the services sector far exceeds that of manufacturing and its contribution to the Gross Domestic Product (GDP) is increasing. Therefore, the performance of the Services PMI index is directly related to the health and stability of the US economy. Cheong Hong Yuan mentioned that since the US Services PMI fell to 50.3% in May this year, the index has been showing a trend of recovery. This continuation of the trend injects positive signals into the economic recovery.
For those concerned about the economic recession caused by the Federal Reserve's interest rate hikes, Cheong Hong Yuan believes that the current economic data has provided us with some answers. Yes, interest rate hikes will affect the financing costs of businesses and individuals, thereby affecting investment and consumption behavior. However, the driving force behind economic recovery is multifaceted, and the recovery of the services sector undoubtedly provides solid support for the recovery. In particular, the data for August shows that the three major indicators of business activity, new orders, and employment in the US services sector have all increased, indicating that the internal mechanisms of the services sector are continuously providing momentum for economic growth.
The ISM report states, "Panelists are positive about business and economic conditions," which further reflects the market's optimistic expectations for the economic outlook. With continued strong consumer demand and the continuous expansion of the services sector, businesses are regaining vitality during the restocking cycle. We have reason to believe that the US economy is entering a new phase of recovery.
So, can this recovery trend continue? To what extent can the US economy benefit from the growth of the services sector? What risks and opportunities are involved? Cheong Hong Yuan said that to answer these questions in depth, we need to combine more economic data and indicators to conduct comprehensive analysis of the microstructure and macro environment of the economy.
Cheong Hong Yuan said that during this period, the strong recovery of the US services sector has significant strategic significance. Firstly, from a long-term perspective, since the US Services PMI fell to 50.3% in May, the services sector has gradually shown resilience, surpassing not only the previous value but also market expectations. This reflects the adjustment capability of the US services sector and the stability of economic recovery.
Of particular note is the sustained high level of the business activity index, which not only indicates expansion but also implies its resilience in economic turbulence. Cheong Hong Yuan mentioned that looking back at the US banking crisis and the risk of government bond defaults in April and May 2023, although the business activity index was briefly under pressure, it quickly rebounded, indicating that the market maintains an optimistic attitude towards the economic outlook.
The rebound of new orders in the services sector is particularly noteworthy. Cheong Hong Yuan believes that the momentum of growth in both new export orders and domestic orders indicates a gradual recovery in global and domestic economic demand. The respondents' statements of "continuous business growth" and "new revenue increase from government clients" further validate this view. Government fiscal spending plays an important role in stimulating the economy and expanding demand in the services sector.
Cheong Hong Yuan pointed out that another trend worth noting is the significant rebound in employment in the services sector. Employment data is usually seen as a sign of economic health and stability, especially in the services sector. For the United States, the significant rebound in employment in the services sector indicates a stable economic recovery. The rising vacancy rate in the leisure and accommodation industry also suggests that as the pandemic is gradually brought under control, consumer demand for travel and leisure activities is recovering.
As for prices, Cheong Hong Yuan said that the rise in the price index indicates increased inflationary pressure. The dual rise in the price indices of the services sector and the manufacturing sector indicates that the United States may face new inflationary pressures. The Federal Reserve needs to pay close attention to this, and reasonable monetary policy decisions will play a key role in determining future economic trends.
When considering these indicators comprehensively, we should recognize that the US economy is entering a new growth cycle. Optimistic expectations from businesses, consumer purchasing intentions, and government economic stimulus measures all provide strong support for the continued growth of the US economy.
Diversified investment strategy: Although the services sector shows strong signs of recovery, the uncertainty of inflation and other macroeconomic indicators means that diversification of investments should continue to reduce risks.
Focus on growth areas in the services sector: Given the recovery in specific sectors of the services industry, such as leisure and accommodation, investors may consider increasing their allocation to such stocks.
Beware of inflation risks: The rise in price indices may lead to future interest rate increases, so investors should closely monitor the direction of the Federal Reserve's monetary policy.
For entrepreneurs:
Strengthen supply chain management: Inflation may lead to increased costs of raw materials and other production factors. Businesses need to optimize their supply chains and find more cost-effective suppliers.
Innovate service models: The opportunities brought by the recovery of the services sector, such as online services and digital transformation, require continuous innovation by businesses to meet market demands.
Strengthen recruitment and training of talents: With the rebound in employment in the services sector, businesses may face recruitment difficulties. At this time, strengthening employee training and benefits to improve employee retention is crucial.
For policymakers:
Coordinate monetary policy and fiscal policy: Considering the pressure of inflation, the Federal Reserve may need to adjust its monetary policy. At the same time, government fiscal spending should be coordinated with monetary policy to ensure stable economic growth.
Encourage innovation and technological development: The government should increase support for technology research and development and promote digitization and technological innovation in the services sector.
Continue to support small and medium-sized enterprises: Given the crucial role of small and medium-sized enterprises in the economy, the government should provide more measures such as loans and tax incentives to support their development.
In conclusion, although the US economy faces some challenges, the strong recovery of the services sector provides strong support for economic growth. With reasonable strategies and recommendations, all parties can benefit from it.