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What's going on?
It looks like activity in the services sector of the US picked up in May, according to a recent survey (reminder, services = things like eating out in restaurants or paying an accountant). That should be pretty good news for the US economy as a whole.
What does this mean?
Recent US economic data suggests that the economy has picked up pace since its lacklustre start to the year. These results were the strongest for services since November and they follow a similar survey for manufacturing firms (e.g. factories) that showed the best performance since February 2015. Data on spending by the average American, out last week, was also pretty good. All in all, the situation seems to be getting a little more encouraging in the US (however, it remains to be seen if the Brexit vote will have a materially negative impact).
Why should I care?
For the markets: Its not all bad news out there. As investors flock to gold and government bonds (see our article above) and commentators talk about the various risks that exist, its encouraging to see that the underlying economy is showing modest signs of improvement (at least in the US). While its certainly possible that a big selloff in financial markets could hurt the economy, its also possible that an improving economy could help support stock prices.
The bigger picture: There are global risks to US growth. The US economy is vulnerable to a slowdown in the rest of the world, e.g. from fewer British tourists as a result of the weak pound or slower Chinese iPhone sales leading to fewer jobs at Apples headquarters in California. How much of an impact it has is debatable but its important to keep an eye on, say, how a post-Brexit slowdown in Europe or (possibly) slower growth in China affects the US.
Originally posted as part of the Finimize daily email.
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