US business activity eases, price pressures build further
WASHINGTON, D.C.: U.S. business activity showed signs of softening in June while inflationary pressures continued to build, driven in part by President Donald Trump's sweeping tariffs and rising global uncertainty.
The developments have complicated the Federal Reserve's interest rate plans and raised concerns about stagflation as the second half of the year begins.
S&P Global's flash U.S. Composite PMI Output Index, which measures both manufacturing and services activity, dipped slightly to 52.8 in June from 53.0 in May. While still in expansion territory, the decline reflects weakening momentum. A separate measure of new orders slipped to 52.3 from 53.0, signaling softer demand.
Prices, however, continued to rise. A key input cost index for manufacturers jumped to 70.0—its highest level since July 2022—mainly due to tariffs. S&P Global reported that nearly two-thirds of manufacturers facing higher costs attributed them to import duties, while over half said they passed those increases on to consumers. As a result, the index tracking prices charged by manufacturers surged to 64.5 from 59.7 in May.
"With tariff-induced price hikes already set to squeeze household spending power, higher gasoline prices would intensify the strain on consumer pockets, risking a more pronounced slowdown in the economy," said James Knightley, chief international economist at ING.
The strain is showing up in housing. A report from the National Association of Realtors showed that existing home sales rose 0.8 percent in May to 4.03 million units, which is still the slowest May pace since 2009. Sales were down 0.7 percent year-on-year, and the 1.3 percent rise in prices was the smallest since 2023. Inventory climbed to its highest level in nearly nine years, indicating softening demand as elevated mortgage rates continue to deter buyers.
"Softer housing sector activity should be an early sign that underlying demand is weakening this year," said Veronica Clark, economist at Citigroup.
The Fed, which last week held interest rates steady from 4.25 percent to 4.50 percent, is under increasing pressure. Vice Chair Michelle Bowman said rate cuts could resume as early as July, even as Fed Chair Jerome Powell warned of "meaningful" inflation ahead.
Geopolitical tensions are adding to inflation fears. After U.S. airstrikes on Iran's nuclear facilities, Goldman Sachs warned that oil prices could spike to US$110 per barrel if shipping through the Strait of Hormuz were disrupted. Oil briefly hit a five-month high on Monday before retreating.
Despite this backdrop, Wall Street rallied this week on hopes of Fed easing. The dollar slipped, and Treasury yields fell.
While S&P's survey showed a modest pickup in employment—mainly driven by manufacturing—some economists remain cautious. Samuel Tombs of Pantheon Macroeconomics noted that unemployment claims are up and questioned the PMI's reliability as a predictor of actual job growth.
"The employment index has been a poor guide to payroll growth lately," he said. "Other surveys all suggest that businesses are slowing employment growth."
As tariff-related costs filter through and uncertainty in the Middle East persists, economists say the risks of slow growth combined with rising prices are growing, bringing the word "stagflation" back into focus.
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Ottawa Citizen
8 minutes ago
- Ottawa Citizen
Canadian conman flees U.S. sentencing after learning how long his prison term might be
Article content A Toronto-area conman skipped his sentencing hearing in a U.S. court, for helping swindle more than $21 million from hundreds of victims, after prosecutors alleged he kept scamming people even after his arrest and guilty plea. Article content Antonio Palazzolo, 67, did not appear in U.S. federal court in Cleveland on May 8, when he was expected to be sentenced for the large, sophisticated investment swindle pulled by a gang of Toronto-based conmen. Article content Article content What was supposed to be his long-delayed sentencing hearing after his guilty plea in 2022 turned into an abrupt five-minute session when Palazzolo failed to join Judge J. Philip Calabrese, two U.S. prosecutors and his own lawyer in court. Article content Article content Calabrese said an arrest warrant would be issued, making him a fugitive. Article content If Palazzolo had shown up, he would have heard prosecutors tell the judge that the U.S. government no longer supports a reduced sentence because 'he has continued to engage in similar fraudulent conduct since pleading guilty in this case,' according to a government memo filed in court a week before the hearing. Article content Prosecutors said Palazzolo kept pulling an almost identical fraud as the one he pleaded guilty to while he remained free in Canada on an unsecured US$20,000 bond while awaiting his sentencing. Article content As his hearing approached, three victims contacted U.S. authorities, two claiming he had ripped them off for big bucks and another that Palazzolo was trying to defraud him as recently as late April, the judge was told. Article content Article content One victim showed the government an invoice from Palazzolo for US$10,000 for a pink diamond dated April 24, according to court records. That's just two weeks before his scheduled court date. Article content Article content Palazzolo's sentencing in Ohio was scheduled after his wire fraud conspiracy conviction from his time as a crooked salesman with Paragon International Wealth Management, Inc., a Toronto firm where he went by the alias John Carson. He and other conmen duped victims in Canada and the United States into buy coloured diamonds for much more than they were worth. Article content The new allegations say that after a Toronto police raid on Paragon's Finch Avenue West telemarketing offices in 2018, Palazzolo kept tricking gullible investors into sending him huge sums for low-value stones using his own company, called Pavillion Diamonds International.
Edmonton Journal
19 minutes ago
- Edmonton Journal
Canadian conman flees U.S. sentencing after learning how long his prison term might be
Article content One victim showed the government an invoice from Palazzolo for US$10,000 for a pink diamond dated April 24, according to court records. That's just two weeks before his scheduled court date. Palazzolo's sentencing in Ohio was scheduled after his wire fraud conspiracy conviction from his time as a crooked salesman with Paragon International Wealth Management, Inc., a Toronto firm where he went by the alias John Carson. He and other conmen duped victims in Canada and the United States into buy coloured diamonds for much more than they were worth. The great Paragon swindle and its cavalcade of conmen is the focus of an in-depth investigative feature in National Post published last summer, called Jack of Diamonds. The new allegations say that after a Toronto police raid on Paragon's Finch Avenue West telemarketing offices in 2018, Palazzolo kept tricking gullible investors into sending him huge sums for low-value stones using his own company, called Pavillion Diamonds International.
Global News
31 minutes ago
- Global News
Ontario budgeted $52M for commercials meant to fend off U.S. tariffs
It was a charm offensive aimed at American politicians and decision-makers for months. Lawmakers landing at Washington Dulles International Airport were met with signs reminding them that Ontario is 'an economic partner that helps employ millions of American workers.' Politicians who thumbed through the pages of The Washington Post were told that Ontario is a 'secure economic partner in an insecure world.' The message was even blasted out to the Super Bowl's millions of viewers. As Donald Trump was inaugurated and started his term as president, Ontario's message of partnership was everywhere. But achieving a level of saturation didn't come cheap. New invoices and documents, obtained by Global News using freedom of information laws, show the budget for the advertising blitz was set by Ontario Premier Doug Ford's office at $52 million. Story continues below advertisement Between mid-December and mid-February, the provincial government shelled out roughly $38 million of that money to buy advertising space. The vast majority went to television commercials, particularly on Fox News. When he unveiled the new strategy in November 2024, Minister of Economic Development, Job Creation and Trade Vic Fedeli said it aimed to underscore the United States' close relationship with Ontario. Fedeli wanted to push the narrative as Trump threatened massive tariffs and mused about Canada becoming the 51st state. 'It's really important just to remind them subtly: we're a trusted partner to your north, we've always been there for you and we'll be there for you tomorrow,' he said. By March, however, the United States had included Canada on its list of countries facing tariffs on steel, aluminum and autos. David Paterson, Ontario's representative on Capitol Hill, conceded the high-value charm offensive had 'been over for quite a while.' Now, opponents of the Ford government are asking what exactly the province achieved by spending tens of millions of dollars beaming its message to American lawmakers who may not have been listening. 'The government should have been looking at: Was this changing minds? Was this influencing Donald Trump? It doesn't appear to have done a whole lot,' Ontario NDP Leader Marit Stiles said. Story continues below advertisement The province said the campaign made 1.9 billion impressions and reached more than 100 million people in the United States. Commercials run after U.S. President Donald Trump elected When Trump won the United States election on Nov. 5, 2024, Ford and his team kicked into high gear, fearing his threats of tariffs and annexation could have a crushing effect on the economy. Get daily National news Get the day's top news, political, economic, and current affairs headlines, delivered to your inbox once a day. Sign up for daily National newsletter Sign Up By providing your email address, you have read and agree to Global News' Terms and Conditions and Privacy Policy By noon on Nov. 6, the premier's office had asked to increase the planned budget for a 'U.S. Partnerships campaign' from $20 million to $52 million, according to emails and other documents seen by Global News. The plan was to run advertisements targeting the United States from January to March 2025. The strategy was then revamped and reworked to start earlier. A massive commercial buy targeting Trump's favoured television network, Fox News, was approved to begin in December on shows with estimated audiences ranging from 6.5 to 8 million people. Story continues below advertisement The government earmarked $17.6 million to buy advertising space on four Fox News prime time shows. It also grabbed slots during American football games. An extra $400,000 was spent to put up posters promoting Ontario at transit shelters in Washington, D.C. and at airports in the United States. In total, the province spent $18 million in December, according to the documents obtained by Global News. That spending continued in January and February, with another total of $19.8 million. The latter cost covered commercials on Amazon Prime, YouTube, Google Search and The Wall Street Journal, among others, alongside another chunk of television commercials. The Ford government did not confirm to Global News if the entire $52 million budget for the campaign was spent. A spokesperson for the Ministry of Economic Development, Job Creation and Trade said the campaign made an impression. 'With the threat of tariffs, as one part of a larger engagement plan, our government launched an advertising campaign to reach Americans on American networks, highlighting our longstanding partnership and value in energy, critical minerals, and other resources that many states rely on,' they said in a statement sent to Global News. 'Our campaign received over 1.9 billion impressions and reached more than 100 million Americans, including key decision-makers who can influence trade policies with Canada and who routinely raise and celebrate the advertising campaign with Ontario officials during meetings.' Story continues below advertisement Critics question what the campaign achieved More than six months after Trump's election and the launch of Ontario's campaign to win American hearts and minds, some are questioning what the province got for its money and why the commercials ran for so long. When tariffs — which remain in place — were announced in March, Ford removed American alcohol from the shelves of the LCBO, said he would cancel a contract with Elon Musk's Starlink and briefly threatened to cut off electricity exports to the United States. The latter threat was quickly stood down in exchange for a meeting with U.S. Commerce Secretary Howard Lutnick, but the tariffs were not removed. Critics believe none of Ford's actions — including the pricey commercial campaign — have had any effect. 'What we see is overspending on advertising in the United States,' Ontario Liberal Leader Bonnie Crombie said. Story continues below advertisement 'And for what results, we have to ask ourselves. Did he stop the tariffs? He did not. Did he protect jobs? No, jobs are leaving the province. Did he strengthen our economy and diversify our trading partners? He did neither of those things.' Stiles said the strategy wasn't necessarily misguided at the beginning, but could have been cut short, with the money funnelled into relief for sectors like steel and auto manufacturing, which have seen tariff-induced layoffs. 'The government seemed to just keep wanting to throw money at advertising campaigns even at a time when Ontarians are really struggling,' she said. Ford's opponents have complained about his government's use of advertising in the past, pointing to recent findings by the auditor general. In December, the auditor general found the Ford government had spent more than any other administration on advertising. The province paid a total of $103.5 million in a single year for commercials. The auditor general concluded those advertisements were 'designed to promote the governing party' rather than to share an important message with the public.
