US economy growing despite manufacturing 'wobble': Economist

S&P Global's US Manufacturing Purchasing Managers' Index (PMI) has come below estimates for April, reading 49.9 against an expected 52.0. This indicates that US manufacturing activity is slowing.

S&P Global Market Intelligence Chief Business Economist Chris Williamson joins Yahoo Finance Anchors Seana Smith and Madison Mills to dive deeper into this data and what it is signaling about economic pullbacks and recession fears related to the Federal Reserve's interest rate holdouts.

"The economy is still growing in April. So the start of the second quarter, you're seeing a growth expansion persist. We had a reading in the first quarter, an average reading consistent with 2% growth, slipping a little bit below that now," Williamson says. "The economy is still expanding, but a little bit of a wobble perhaps in April. It's going to be interesting to watch this and see how that persists."

For more expert insight and the latest market action, click here to watch this full episode.

This post was written by Luke Carberry Mogan.

Video Transcript

- So to discuss this more, the S&P Global's US manufacturing PMI, again, coming in at 49.9 versus that 52 estimate, remaining above the 50 mark. That could be signaling business activity is slightly stalling. So here to discuss, we have Chris Williamson, S&P Global Market Intelligence chief business economist and executive director. Chris, thanks for being here. Talk to me about your reaction to this print. Does it change your view at all?

CHRIS WILLIAMSON: No. I mean, what we're looking at here when you look at manufacturing and services combined, the economy is still growing in April. So the start of the second quarter, you're seeing a growth expansion persist.

We had a reading in the first quarter, an average reading that was consistent with about 2% growth. You're slipping a little bit below that now. So economy's still expanding, but a little bit of a wobble perhaps in April. So it's going to be interesting to watch this and see how that persists. But certainly, the second quarter so far is not looking as strong as the first quarter, which I think is pretty much aligned with what most people were anticipating. It was a good start to the year, and losing some momentum.

- Chris, what do you attribute this to the decline in new orders? We're seeing that for the first time in six months. Maddie just highlighted some of the weakness that we're seeing, at least on the labor front, the lowest employment reading that we've seen in nearly four years. Is this a result of the potential of higher for longer? What do you attribute that to?

CHRIS WILLIAMSON: Yeah, it looks like it. So we've had a pullback in business expectations about the year ahead. So one of the questions in the survey is what do you think your own output or your firm will be in the coming year? And that's taken a dive. It's slipped back to levels that we saw late last year when there were quite a lot of concerns about recession.

So this seems to have-- this concern seems to have heightened, and you can align that with these rate cut expectations. Of course, there were 160 basis points of rate cuts being penciled in late last year, and now you're looking at will there be one?

And this has fed through to business confidence and also the higher yields feeding through. So it looks like you've got the financial conditions tightening a bit, which has caused this little bit of a stammer to growth really. So I think that's what we're looking at.

You've got demand pulling back slightly, a sort of readjustment, if you like, of the demand environment in the light of this new rates environment. So it's going to be key really to watch what happens in the next couple of months. Is this a one-off monthly adjustment, or is this the start of a more worrying downturn?