New York, United States – The latest flash PMI data for May has brought promising news on economic growth in the four major developed economies, known as the ‘G4.’ According to S&P Global, output in both the manufacturing and service sectors increased at the fastest rate in a year. Inflation pressures also eased, reaching one of the lowest levels in over three years. Despite the stubbornly high inflation rate, variations in growth and inflation trends were observed among the four economies.

Economic growth saw acceleration across all four major developed economies in May, with the GDP-weighted average PMI Output Index climbing from 50.5 in April to 52.0 – the highest level in a year. This increase, indicative of rising output for the fifth consecutive month, was driven by growth in the service sector, which experienced its sharpest rate of growth in a year. Additionally, manufacturing showed signs of improvement with the first noteworthy increase in factory production in two years.

The United States led the upturn among the four economies, with the strongest expansion in May. The country experienced the sharpest rate of output growth in over two years, supported by a 12-month-high expansion in the service sector and a significant increase in manufacturing output. While the UK, Eurozone, and Japan also saw growth, the rates were more modest compared to the US.

In the Eurozone, the expansion reached a 12-month high, driven by a services-led upturn and an improvement in factory output. Japan’s expansion was the strongest in nine months, with sustained growth in services and the near-stabilization of manufacturing production. On the other hand, the UK experienced a slowdown in growth, with services expansion decelerating but offset by a jump in manufacturing output.

Looking ahead, future output expectations in the G4 economies improved in May, with new business inflows rising at the steepest rate in 11 months. Despite this, employment growth varied across the regions, with Europe and Japan seeing rises in employment, while the US reported a decline for the second consecutive month.

From an inflation perspective, average prices charged for goods and services saw mixed trends across the G4 economies. While the selling price index edged down to a four-month low, it remained close to the average recorded over the past ten months. The Eurozone reported the slowest rate of price increase, with the US seeing relatively muted inflation despite a slight uptick.

Overall, the major developed economies are showing signs of gaining momentum in the second quarter, with improvements in growth and employment. However, inflation remains elevated by pre-pandemic standards, particularly in the UK and Japan. Policymakers are likely to approach monetary policy cautiously, especially considering the slow descent of inflation and the impact of stronger growth on pricing power and wage negotiations.