Surveys point to a fresh acceleration in the U.S., even as growth in the eurozone strengthens
3 min
Global economic growth is becoming more broad based, with surveys indicating that business activity in both the U.S. and the eurozone gained momentum in May.
The eurozone economy contracted in the second half of 2023 following a surge in energy and food prices triggered by Russia’s invasion of Ukraine, and the subsequent rise in interest rates intended to tame that inflation.
By contrast, the U.S. economy expanded strongly over the same period, opening up an unusually wide growth gap with the eurozone. That gap narrowed as the eurozone returned to growth in the first three months of the year, while the U.S. slowed.
However, surveys released Thursday point to a fresh acceleration in the U.S., even as growth in the eurozone strengthened. That bodes well for a global economy that relied heavily on the U.S. for its dynamism in 2023.
The S&P Global Flash U.S. Composite PMI —which gauges activity in the manufacturing and services sectors—rose to 54.4 in May from 51.3 in April, marking a 25-month high and the first time since the beginning of the year that the index hasn’t slowed. A level over 50 indicates expansion in private-sector activity.
“The data put the U.S. economy back on course for another solid gross domestic product gain in the second quarter,” said Chris Williamson, chief business economist at S&P Global Market Intelligence.
Eurozone business activity in turn increased for the third straight month in May, and at the fastest pace in a year, the surveys suggest. The currency area’s joint composite PMI rose to 52.3 from 51.7.
The uptick was led by powerhouse economy Germany, where continued strength in services and improvement in industry drove activity to its highest level in a year. That helped the manufacturing sector in the bloc as a whole grow closer to recovery, reaching a 15-month peak.
By contrast, surveys of purchasing managers pointed to a slowdown in the U.K. economy following a stronger-than-expected start to the year that saw it outpace the U.S. The survey was released a day after Prime Minister Rishi Sunak called a surprise election for early July, banking on signs of an improved economic outlook to turn around a large deficit in the opinion polls.
Similar surveys pointed to a further acceleration in India’s rapidly-expanding economy, and to a rebound in Japan, where the economy contracted in the first three months of the year. In Australia, the surveys pointed to a slight slowdown in growth during May.
Businesses reported that they were raising their prices at the slowest pace since November, which should reassure the European Central Bank. However, the eurozone continued to add jobs in May, suggesting that wages might not cool as rapidly as the ECB had hoped.
The ECB released figures Thursday that showed wages negotiated by labor unions in the eurozone were 4.7% higher in the first quarter than a year earlier, a faster increase than the 4.5% recorded in the final three months of 2023
The ECB has signalled it will lower its key interest rate in early June, while the Fed is waiting for evidence that a slowdown in inflation will resume after setbacks this year.
Nevertheless, eurozone businesses and households shouldn’t bank on successive cuts to borrowing costs, ECB Vice President Luis de Guindos said. “There is a huge degree of uncertainty,” he said. “We have made no decisions on the number of interest rate cuts or on their size,” he said in an interview published Thursday. “We will see how economic data evolve.”
Continued resilience in the eurozone economy would likely make the ECB more cautious about lowering borrowing costs after its first move, economist Franziska Palmas at Capital Economics wrote in a note. “If the economy continues to hold up well, cuts further ahead may be slower than we had anticipated,” she said.
– Edward Frankl contributed to this story.
Copyright 2020, Dow Jones & Company, Inc. All Rights Reserved Worldwide. LEARN MORE
Following the successful launch of its Palais Collection, MAISON de SABRÉ has unveiled a new modular handbag system offering more than 720 styling combinations.
Automobili Lamborghini and Babolat have expanded their collaboration with five new colourways for the ultra-exclusive BL.001 racket, limited to just 50 pieces worldwide.
With US$40 million already committed, the Global Talent Fund is attracting investor attention with a strategy focused on building globally scalable consumer brands alongside high-profile talent.
2 min
A new investment fund targeting celebrity-founded consumer brands has secured US$40 million in commitments and is rapidly approaching its US$50 million fundraising target, signalling growing investor appetite for alternative opportunities beyond traditional asset classes.
The Global Talent Fund, which has a maximum raise of US$100 million, focuses on building and investing in consumer businesses alongside celebrities, athletes, and influential personalities who play an active role as co-founders rather than simply endorsing products.
The strategy is based on the belief that changes in consumer behaviour, particularly the rise of social media and digital engagement, have fundamentally altered how brands are built and scaled.
GTF founding partner Jeremy Hunt, who is helping lead the fund’s strategy, said consumers increasingly feel connected to personalities they follow online and are more willing to support products developed by those individuals.
“Consumers are searching for content to engage with, and when a celebrity they like or follow takes them on the journey of creating a product or brand, they genuinely feel part of that process,” he said.
The fund is targeting high-growth consumer sectors including wellness, hydration, beauty and recovery, areas Hunt believes continue to benefit from strong global demand and ongoing innovation.
Rather than backing celebrity endorsement deals, the fund is seeking businesses where talent is deeply involved in product development, brand creation and long-term growth.
According to Hunt, authenticity remains one of the biggest differentiators between successful celebrity-backed brands and those that fail.
“The consumer can see clearly if someone is simply being paid to promote a product,” he said. “The winners are typically the brands where the celebrity has genuinely helped build the business from the ground up.”
The model has attracted support from several prominent Australian investors and business families, reflecting broader interest in alternative investments with global growth potential.
Hunt said consumer brands offered a level of tangibility that many investors found appealing.
“Consumer brands are what we touch, feel, smell and taste every day,” he said. “Our investors understand the growth potential in the model, but they also want to be part of the journey.”
The fund’s rapid progress towards its fundraising target comes amid growing recognition that celebrity influence, when combined with strong commercial execution and scalable business models, can create significant enterprise value.
With several high-profile celebrity-founded businesses generating billion-dollar exits in recent years, supporters of the strategy believe the opportunity remains in its early stages.
