Month: June 2023

Authored by Tsvetana Paraskova via OilPrice.com,

• Nuclear power generation could help the world decarbonize energy amid growing global demand for electricity.

• Despite growing government support for nuclear energy in several countries, the economics of nuclear energy at its current state of development and innovation just doesn’t add up.

• WoodMac: the biggest economic hurdle to the widescale adoption of SMRs is cost.

Nuclear power generation could help the world decarbonize energy amid growing global demand for electricity with the ‘electrify everything’ push, including in transportation.

The energy crisis of the past year and a half has led to increased support for nuclear power in many countries, including the U.S., the UK, and even Japan.

But negative perceptions are still entrenched, and nuclear costs are still much higher than the cost of providing wind and solar power. What wind and solar don’t currently have is stable baseload capacity to ensure a constant supply of electricity regardless of the weather. Nuclear power can do that, and its low lifecycle emissions can generate additional low-emission electricity to complement wind and solar energy.

Electricity Demand Set To Surge

Currently, electricity meets some 20% of the total global energy demand, but “Over the next 30 years, almost everything that can be electrified will,” Wood Mackenzie said in a recent report.

By 2050, the share of electricity in the world’s energy mix could more than double to 50%, and the need for power generation could be 1.7 times higher than current levels, according to WoodMac’s base case. 

Under the same base case, nuclear power capacity is set to increase by 280 gigawatts (GW) by 2050.

Despite growing government support for nuclear energy in several countries, the economics of nuclear energy at its current state of development and innovation just doesn’t add up. Conventional nuclear power reactors and stations require billions of upfront investment and often face project cost overruns, while the next-generation reactors and small modular reactors are not cost-competitive now, either.

The Cost Challenge To Nuclear Renaissance  

“The biggest economic hurdle to the uptake of the latest nuclear and small modular reactors (SMRs) is cost,” WoodMac said in its report.

If nuclear is set to play a role in the energy transition and decarbonization, lower costs—alongside greater social acceptance—will be key, the consultancy said.

Conventional nuclear power generated with pressurized water reactors (PWR) currently has a levelized cost of electricity (LCOE) at least four times that of wind and solar, per WoodMac’s estimates.

“The nuclear industry will have to address the cost challenge with urgency if it is to participate in the huge growth opportunity that low-carbon power presents. At current levels, the cost gap is just too great for nuclear to grow rapidly,” said David Brown, Director, Energy Transition Service at Wood Mackenzie, and lead author of the report.

The current costs of small modular reactors (SMRs), which analysts and governments believe could be the future of nuclear power, is even higher than the current generation of PWRs and much higher than wind, solar, natural gas, and coal power generation.

The promise of SMRs is that it’s a shorter-cycle approach and could avoid some of the manufacturing and commissioning pitfalls that giant PWR projects have encountered, WoodMac notes.

“SMRs are designed to be modular, factory-assembled and scalable. They are expected to be quicker to market, with a target construction time of three to five years compared with the ‘nameplate’ 10 years needed to build a large PWR,” Brown says.

Small Modular Reactors

The key to at-scale adoption of SMRs will be how fast costs could fall and potentially make this type of nuclear energy generation cost-competitive with other forms of energy, especially renewables.

Many companies are already working on SMRs and governments in the U.S., UK, and France, for example, bet on this type of technology and support its research and development.

Westinghouse is already seeking pre-application Regulatory Engagement Plan with the U.S. Nuclear Regulatory Commission (NRC) for its small modular reactor (SMR) called AP300 and using the technology of its flagship AP1000 reactor. The advanced passive safety system automatically achieves safe shutdown without operator action and eliminates the need for backup power and cooling supply, Westinghouse says, adding that “this also directly translates into a simplified design, lower CAPEX and smaller footprint.”

Design certification is anticipated by 2027, followed by site-specific licensing and construction on the first unit toward the end of the decade.

SMRs could also be used in industries to cut emissions that are hard to abate. For example, new research from NuScale Power showed this week the capabilities of NuScale SMRs for reducing emissions in industrial sectors.

UK’s Rolls-Royce plc said earlier this year it had progressed to Step 2 of the Generic Design Assessment (GDA) for its SMR, following the successful completion of the first step in the assessment by the UK’s independent nuclear regulators. The milestone puts Rolls-Royce SMR ahead of other designs in securing consent for an SMR to operate in the UK. Rolls-Royce says its ‘factory-built’ SMR power plant can generate 470 MW of low-carbon electricity – enough to power a million homes for at least 60 years.

With technological advances, SMRs may have the chance to see lower costs in the future, but cost is not the only hurdle where nuclear energy is concerned.

Greater public support, expansion and diversification of the uranium supply chain, and strong offtake agreements for nuclear power would also be vital for this type of low-emission energy source to play a more important role in the energy transition.

“Expanding public support for nuclear will be critical to expanding investment; voters will need to embrace the value proposition of nuclear for it to have a social licence to operate,” WoodMac’s Brown said.

“This is not as unrealistic as it sounds: today’s nuclear industry grew out of the energy security concerns and high commodity prices of the 1970s ? similar market dynamics to those we face today.”   

The week after payrolls is almost always a bit quiet for data and this week DB’s Jim Reid reminds us that we have the added kicker of a Fed that has started their media blackout period ahead of next week’s FOMC which will be preceded by a key CPI print on Tuesday 13th, one day before the Fed decision.

At the moment markets price in around 22% chance of a hike next week and maybe CPI might be the main thing that shifts those odds towards a hike if the report is strong, according to Reid. If the Fed wants to communicate to the market one way  or another ahead of next week then well placed media stories might surface (so far Timiraos has been hinting at a pause/skip).

However before CPI that does seem unlikely as nothing will be 100% decided until then. We are are back to having a fair bit of uncertainly over the near-term Fed outlook though. After spending most of the 4-day shortened week last week  rallying around 25bps from the highest point post-SVB, 2yr US notes sold off +16bps on Friday after a strong headline payroll number that seemed to mask some notable weakness under the surface in the report. The headline increased +339k (+195k expected) with +94k of revisions over the last two months. However hours worked ticked down a tenth to 34.3hrs, which marks the lower end of the pre-covid range, and unemployment ticked up three-tenths to 3.7% via the household survey that showed employment falling by 310k with a 440k increase in unemployment. The household part of the report can be more volatile so caution is required. Adding to the confusing nature of the report, average hourly earnings came in at 4.3% YoY (vs 4.4% expected), still too high for comfort for the Fed but ticking lower.

Next up on the agenda, and as we detailed in “Liquidity To Collapse $1 Trillion In “3 Or 4 Months”, Pushing Economy Into The Abyss“, with the debt ceiling deal signed into law over the weekend, watch for a dramatic rebuild in the US TGA (Treasury General Account) over the next few weeks and months. This starts this week with T-bill issuance that DB’s Steven Zeng suggests could in net terms hit $400bn in June and cumulatively $800bn by the end of August and $1.3tn by year-end. If you’re on the bearish side this deluge could drain liquidity in financial markets but if you’re more sanguine you would say it will just reshuffle money away from money market funds and equivalents (so far no money has left MMFs which are at all time highs).

In data terms, the quiet week ahead will be headlined by today’s global services PMIs and the US ISM and factory orders prints, both of which disappointed (see here and here). Other highlights will be US factory orders (today) and US trade and consumer credit (Wednesday).

Over in Europe, key data releases for Germany include the trade balance today, factory orders tomorrow and industrial production on Wednesday. Elsewhere in the region, notable releases include the trade balance for France on Wednesday, retail sales for the Eurozone tomorrow and industrial production for Italy on Friday. In Asia, Japanese wages tomorrow and China CPI on Friday will be the highlights.

In terms of central banks, the RBA meet tomorrow with markets pricing in around a 30% chance of a hike with a full hike cumulatively priced in by the August meeting after recent hot inflation numbers. DB economists have now moved to price in a 25bps hike tomorrow, August and September now. The Bank of Canada meet the following day with markets pricing a one-in-three chance of a hike with economists closer to 50/50.

Courtesy of DB, here is a day-by-day calendar of events

Monday June 5

• Data: US May ISM services, April factory orders, China May Caixin services PMI, UK May official reserves changes, new car registrations, European wide May services PMI, Germany April trade balance, Eurozone April PPI

Tuesday June 6

• Data: UK May construction PMI, Japan April labor cash earnings, household spending, Germany May construction PMI, April factory orders, Eurozone April retail sales, Canada April building permits
• Central Banks: ECB Consumer Expectations Survey

Wednesday June 7

• Data: US April trade balance, consumer credit, China May trade balance, foreign reserves, Japan April leading index, coincident index, Italy April retail sales, Germany April industrial production, France April trade balance, current account balance, Canada Q1 labor productivity, April international merchandise trade
• Central Banks: BoC rate decision, ECB’s Guindos and Panetta speak

Thursday June 8

• Data: US Q1 household change in net worth, April wholesale trade sales, initial jobless claims, UK May RICS house price balance, Japan May Economy Watchers survey, bank lending, April trade balance, current account balance, France Q2 total payrolls

Friday June 9

• Data: China May CPI, PPI, Japan May M2, M3, Italy April industrial production, Canada Q1 capacity utilization rate, May jobs report

Finally, looking at just the US, Goldman writes that the key economic data release this week is the ISM services report on Monday. Fed officials are not expected to comment this week given the blackout period leading up to the FOMC meeting June 13-14.

Monday, June 5

• 09:45 AM S&P Global US services PMI, May final (consensus 55.1, last 55.1)
• 10:00 AM Factory orders, April (GS +1.0%, consensus +0.8%, last +0.4%); Durable goods orders, April final (last +1.1%); Durable goods orders ex-transportation, April final (last -0.2%); Core capital goods orders, April final (last +1.4%); Core capital goods shipments, April final (last +0.5%)
• 10:00 AM ISM services index, May (GS 53.0, consensus 52.6, last 51.9): We estimate that the ISM services index rebounded by 1.1pt to 53.0 in May. Our forecast reflects the rebound in our GSAI, favorable seasonality, and a modest improvement in other business surveys on net (services tracker +0.1pt to 50.2). The lack of negative news on the banking sector in recent weeks also argues for sequential improvement.
• 01:30 PM Cleveland Fed President Loretta Mester (FOMC non-voter) speaks: Cleveland Fed President Loretta Mester will deliver welcome remarks at an event for the Council for Economic Education hosted by the Cleveland Fed. Mester is not expected to comment on monetary policy given the blackout period.

Tuesday, June 6

• No major data releases scheduled.

Wednesday, June 7

• 08:30 AM Trade balance, April (GS -$74.0bn, consensus -$75.4bn, last -$64.2bn): We estimate that the trade deficit widened by $9.8bn to $74.0bn in April.

Thursday, June 8

• 08:30 AM Initial jobless claims, week ended June 3 (GS 225k, consensus n.a., last 232k); Continuing jobless claims, week ended May 27 (consensus N.A., last 1,438k); We estimate initial jobless claims declined to 225k in the week ended June 3.
• 10:00 AM Wholesale inventories, April final (consensus -0.2%, last -0.2%)

Friday, June 9

• No major data releases scheduled.

Source: DB, Goldman, BofA

Did Ukraine forces just attempt to kick off their much anticipated major counteroffensive, only to have it put down immediately after it began? 

That’s what the Russian Defense Ministry (MoD) suggested early Monday in announcing that Ukraine began a “large-scale offensive” in mounting attacks along five sections of the frontlines in the eastern Donbas region. But Russia said it thwarted the major attack and that some 250 Ukrainian troops were killed, which included Ukraine sending six mechanized and two tank battalions to Russian-controlled southern Donetsk.

“On the morning of June 4, the enemy launched a large-scale offensive in five sectors of the front in the South Donetsk direction,” the MoD statement began. “The enemy has failed to reach its goals and was unsuccessful.”

It added that in total the attacking forces lost six tanks, three infantry vehicles, and 21 armored vehicles in what would mark a significant defeat if confirmed. “The enemy’s goal was to breach our defenses in what they assumed was the most vulnerable section of the frontline,” the Russian military statement continued. 

“During the day, the occupiers made 23 attacks, but all of them were repulsed by units of the defense forces,” the MoD continued, in reference to attacks also along front lines of Luhansk, Zaporizhia and Kherson.

The ministry further specified that Russian Chief of the General Staff Valery Gerasimov “was at one of the forward command posts” at the time of the thwarted attacks. 

While Ukrainian President Volodymyr Zelensky just days ago said that his forces stand ‘ready’ to launch a counteroffensive, he made not mention of the alleged assault Sunday night when he gave his nightly video address.

BBC has remained very skeptical of the Russian military narrative, and yet Kiev has admitted some degree of “offensive actions” Sunday into Monday:

But on Monday Ukraine issued a statement denouncing Russian ‘lies’ and propaganda that aims to demoralize and mislead the Ukrainian public, but without directly referencing the specific Kremlin claims of a thwarted counteroffensive. According to Reuters: 

The commander of Ukraine’s ground forces, Oleksandr Syrskyi, said on Monday that Ukrainian forces continued “moving forward” near the long-contested city of Bakhmut in northern Donetsk. He made no comment on the counter-offensive.

The daily report from Ukraine’s General Staff said only that there were 29 combat clashes in the Donetsk and Luhansk regions of eastern Ukraine.

Ukraine’s Centre for Strategic Communications did not address the Russian statement directly but said, without providing evidence, that Russia would seek to spread lies.

“To demoralize Ukrainians and mislead the community (including their own population), Russian propagandists will spread false information about the counteroffensive, its directions, and the losses of the Ukrainian army,” it said.

Given the vague response from the Ukrainian side in the face of significant Russian claims which are currently grabbing world headlines, this for many observers is going to give credence to the Kremlin statements. 

Reuters in its Monday reporting noted the following: 

Ukrainian Defence Minister Oleksii Reznikov published a cryptic message on Twitter on Sunday, quoting Depeche Mode’s track “Enjoy the Silence”.

Ukraine’s intel operators appear to be taunting Russia here that the counteroffensive won’t be announced but could begin at any time…Ukraine’s Ambassador to the US @OMarkarova joins @FaceTheNation this morning. https://t.co/ftA0XL4Ra9

— Margaret Brennan (@margbrennan) June 4, 2023

As we detailed earlier, in recent days Ukrainian officials have been openly taunting Russia ahead of the offensive.

If the Russian MoD statements prove true, this marks disaster for the Ukrainian military, given a defeat at the very start of the counteroffensive would likely sap morale and momentum, given also already there have been widespread reports that inexperienced and untrained Ukrainians are being sent to the frontlines in droves amid mounting heavy casualties.  

“We are continuing the defense that we started on February 24, 2022. A defensive operation includes everything, including counteroffensive actions. Therefore, in some areas we are moving to offensive actions,” Deputy Minister of Defense of Ukraine Hanna Maliar said. pic.twitter.com/MhAsw2LVa3

— NOELREPORTS 🇪🇺 🇺🇦 (@NOELreports) June 5, 2023

Meanwhile, there does appear to be some degree of confirmation from Ukrainian officials trickling out that “offensive actions” have indeed begun in various sectors.

But Ukraine’s deputy defense minister is seeking to stress that Russia is putting out claims of beating back the counteroffensive in order to “divert attention from the defeat” in locations near Bakhmut.

Authored by Jonathan Turley,

Below is my column in The Hill on the increasing justification of violence by the left on our campuses by declaring speech itself “violence.” It is part of the license of our age of rage for many who want to silence opposing viewpoints. There is, however, a way to end this anti-free speech movement sweeping through higher education.

Here is the column:

“Silence is violence.”

When those words became a popular mantra years ago on college campuses, I wrote that the anti-free speech movement was moving toward compelled speech while declaring dissenting views to be harmful.

Today, it isn’t just silence that is considered violence on college campuses. It is also speech, as both faculty and students are actively shutting down opposing views on subjects ranging from abortion to climate change to transgender issues.

Recently, many people were shocked by a videotape of Hunter College professor Shellyne Rodríguez trashing a pro-life student display in New York. Most were focused on her profanity and vandalism, but there were familiar phrases that appeared in her diatribe to the clearly shocked students.

Before trashing the table, she told the students, “You’re not educating s–t […] This is f–king propaganda. What are you going to do, like, anti-trans next? This is bulls–t. This is violent. You’re triggering my students.”

The videotape revealed one other thing. At Hunter College, and at other colleges, it seems that trashing a pro-life student display and abusing pro-life students is not considered a firing offense. Hunter College refused to fire Rodríguez.

The PSC Graduate Center, the labor organization of graduate and professional schools at the City University of New York, supported that decision and said Rodríguez was “justified” in trashing the display, which the organization described as “dangerously false propaganda” and “disinformation.”

Rodríguez later put a machete to the neck of a reporter, threatened to chop him up and then chased a news crew down a street with the machete in hand. Somewhere between the machete to the neck and chasing the reporters down the street, Hunter College finally decided that Rodríguez had to go.

Rodríguez denounced the school for having “capitulated” to “racists, white nationalists, and misogynists.” She explained that her firing was just a continuation of “attacks on women, trans people, black people, Latinx people, migrants, and beyond.”

The redefinition of opposing views as “violence” is a favorite excuse for violent groups like antifa, which continue to physically assault speakers with pro-life and other disfavored views.  As explained by Rutgers Professor Mark Bray in his “Antifa: The Anti-Fascist Handbook,” the group believes that “‘free speech’ as such is merely a bourgeois fantasy unworthy of consideration.”

As one antifa member explained, free speech is a “nonargument…you have the right to speak but you also have the right to be shut up.”

When people criticized antifa for its violent philosophy, MSNBC’s Joy Reid responded to the critics that “you might be the fascist.”

Faculty members have followed this sense of license to silence others. Former CUNY law dean Mary Lu Bilek even insisted that disrupting a speech on free speech was free speech. (Hunter is part of the CUNY system.)

The same week as the Rodríguez attack at the State University of New York at Albany, sociology professor Renee Overdyke shut down a pro-life display and then allegedly resisted arrest.

Just last week, the Pride Office website at the University of Colorado (Boulder) declared that misgendering people can be considered an “act of violence.”

This week, University of Michigan economics professor Justin Wolfers declared that some of those boycotting the store Target over its line of Pride Month clothing were engaging in “literal terrorism.” (He insists that he was referring to those confronting Target employees.)

Faculty have also justified attacks on pro-life figures. At the University of California, Santa Barbara, feminist studies associate professor Mireille Miller-Young physically assaulted pro-life advocates and tore down their display. 

She pleaded guilty to criminal assault, but the university refused to fire her. Instead, some faculty and students defended her, including claiming that pro-life displays constitute terrorism. The University of Oregon later honored Miller-Young as a model for women advocates.

Likewise, at Fresno State University, public health professor Dr. Gregory Thatcher recruited students to destroy pro-life messages.

Other faculty have called for or countenanced violence against Republicans and conservatives. Professors have shouted down speakers, destroyed property, participated in riots and verbally attacked students.

University of Rhode Island professor Erik Loomis defended the murder of a conservative protester and said he saw “nothing wrong” with such acts of violence. He was later elevated to the position of director of graduate studies of history.

As faculty commit or support violence, students are assured that others are the violent ones. Recently, at the University of Texas at Austin, Professor Kirsten Bradbury tested her students on psychology by asking them “which sociodemographic group is most likely to repeatedly violate the rights of others in a pattern of behavior that includes violence, deceit, irresponsibility, and a lack of remorse?” Of course, the answer was wealthy white men.

The lesson took with students. A recent poll shows that 41 percent of college students now believe violence is justified to fight hate speech. At Cornell, a conservative speaker was shouted down, met with the common mantra that “your words are violence.” At Case Western, the student newspaper editorialized against university recognition of a pro-life group because its pro-life views are “inherently violent” and “a danger to the student body.” At Wellesley, student editors declared that it was time to shut down conservative speakers and that “hostility may be warranted.” They added, “The spirit of free speech is to protect the suppressed, not to protect a free-for-all where anything is acceptable, no matter how hateful and damaging.”

Those views did not spontaneously appear in the minds of these students. At one time, tolerance for free speech was the very touchstone of higher education and a common article of faith for students. These students are the product of years of being told that free speech is dangerous and harmful if left unregulated. From elementary school to college, they were taught that they did not have to be “triggered” by the speech of others.

We are still (thankfully) drawing the line at machete attacks. But it is the underlying views of Rodríguez that are the true threat, and they are being replicated throughout the country. We are raising a generation of censors and speech-phobics.

If we want to stop or reverse this trend, Congress must act. I have proposed legislation that would deny federal funding to schools that do not protect core free speech principles. We are funding schools that are taking a machete to the defining right of our democracy.

It is akin to the recent resolution of the case of an antifa member who took an axe to Sen. John Hoeven’s (R-N.D.) office in Fargo. Thomas “Tas” Alexander Starks, 31, was given probation…and his axe back.

We may not be able to deter people from speaking through machetes and axes, but we can at least stop subsidizing the hardware.

It really should not have been a surprise – given the weakness in Manufacturing PMIs – but headline and core US factory orders disappointed in April (today’s latest data).

The headline factory orders rose just 0.4% MoM (half the 0.8% MoM expected) and worse still, the March data was revised form from +0.9% to +0.6% MoM.

Source: Bloomberg

That left the annual growth in new orders at just 0.2% – the weakest since Oct 2020.

Core factory orders (ex-transports) was even worse, dropping 0.2% MoM (+0.2% MoM exp) – the third straight monthly decline…

Source: Bloomberg

This left core factory orders down 2.2% YoY – the biggest drag since the COVID lockdowns.

How long can the manufacturing side of the economy continue to collapse before the Services side catches down?

Authored by Ted Dabrowski and John Klingner via Wirepoints.org,

How long will Chicago’s Mayor Brandon Johnson stick with his “violence as a symptom of disinvestment” explanation that was widely criticized? 

His comments came last weekend after 12 Chicagoans were murdered and 53 shot.

Memorial Day weekend was a big test for the new mayor, whose investment in yellow-vest “Peacekeepers” and anti-violence programs failed to stem the bloodshed.

That weekend was bad enough, but now he’s got another weekend of 10 murdered and 52 shot (as of 5pm Sunday).

 From ABC7:

1. A shooting in Austin Sunday left one person dead and six others wounded. A 25-year-old woman was killed in the shooting.

2. Minutes earlier, a 34-year-old man was fatally shot and another was wounded downtown, police said. 

3. Hours later, another 30-year-old man was shot to death and a woman was wounded in Little Italy. 

4. A 40-year-old man was fatally shot Saturday night in front of a home in Chatham. 

5. Over an hour earlier, a 19-year-old man was killed and another was wounded in a shooting in Humboldt Park. 

6. A 70-year-old man was killed and another wounded in a shooting Saturday morning in Englewood on the South Side. 

7. Hours earlier, a 31-year-old man was fatally shot in the city’s South Shore neighborhood. 

8. Just under three hours earlier, a 32-year-old man was shot and killed in North Lawndale. 

9. About two hours before that, a 23-year-old man was fatally shot while sitting in his car in the Austin neighborhood.

[Additionally, as Thomas Lifson reports, in video leaked to CWB Chicago, we see how much worse matters have become, with 2 machine gun-armed men caught on video firing at unseen targets, killing a child, and injuring at least 3 others.

To make matters much worse, when police arrived to investigate, a 16-year-old boy fired shots at the officers, thankfully missing them.]

Mayor-Elect Brandon Johnson’s focus on “root causes,” with little-to-no emphasis on containing today’s out-of-control violence, is a strategy doomed to fail.

Tackling root causes is important, but they take a long time to address – if they can even be agreed to.

We wrote only a month ago that Johnson should count on the following if he won’t tamp down on crime immediately:

• Crime will continue to pay.

• Large number of Chicagoans will continue to be victimized.

• 911 responses will continue to be delayed.

• Minorities will continue to suffer most.

• Cops will continue to leave

• More and more dangerous felons will be released. 

• Chicago will continue to lead the nation in homicides.

For full details, read: “What Chicago requires immediately is deterrence. Stop the bleed. Fast.

Following the decline in Manufacturing survey data (both ISM and PMI in contraction – sub-50), both Services surveys were expected to show improvements in May.

• S&P Global US Services PMI prints 54.9 final for May (missed expectations and down from 55.1 flash print) but higher than the 53.6 in April (highest since April 2022)

• ISM Services prints 50.3 for May missing expectations of a rise to 52.4 from 51.9 – lowest since Dec 2022

Source: Bloomberg

Comparing the two series shows the growing divergence between Services and Manufacturing – spot the odd one out!

Source: Bloomberg

Under the hood, Services employment dropped into contraction as new orders and prices paid slipped lower…

Source: Bloomberg

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:

“The US continued to see a two-speed economy in May, with the sluggishness of the manufacturing sector contrasting with a resurgent service sector. Businesses in sectors such as travel, tourism, recreation and leisure are enjoying a mini post-pandemic boom as spending is switched from goods to services.

“However, just as demand has moved from goods to services, so have inflationary pressures. While goods price inflation has fallen dramatically in May to register only a marginal increase, prices charged for services continue to rise sharply.

“Although down considerably on last year’s peaks, service sector inflation remains higher than any time in the survey’s 10-year history prior to the pandemic, bolstered by a combination of surging demand and a lack of operating capacity, the latter in part driven by labor shortages.

“However, while rejuvenated service providers will make hay in the summer season, the weakness of manufacturing raises concerns about the economy’s resilience later in the year, when the headwind of higher interest rates and the increased cost of living is likely to exert a greater toll on spending.”

Finally, we note that The S&P Global US Composite PMI Output Index posted 54.3 in May, up from 53.4 in April, to signal the fastest expansion in business activity for just over a year.

The survey data are indicative of GDP growing at an annualized rate of just over 2%, and an upturn in business expectations points to growth remaining robust as we head further into the summer.