### Revival in US Economic Activity Tempered by Rising Tariff-Induced Costs

Economic activity in the United States displayed signs of recovery in May, with businesses beginning to adapt to President Trump's recent tariff rollbacks. According to the flash US composite Purchasing Managers' Index (PMI) from S&P Global, activity levels in both the services and manufacturing sectors increased, pushing the index to 52.1 in May from 50.6 in April.

The services sector showed notable improvement, with the services PMI rising to 52.3 in May, up from 50.8 in the previous month. Similarly, the manufacturing sector saw a boost, with its PMI climbing to 52.3 from 50.2 in April. Chris Williamson, chief business economist at S&P Global Market Intelligence, mentioned that business confidence improved in May, following the pause on higher rate tariffs. This uplift came as a welcome change from the concerning slump experienced in April.

Despite the positive trend in economic output, the shadow of tariffs continues to loom over the business landscape. Williamson warned of clear indications that the imposition of tariffs is driving prices higher and causing disruptions in supply chains. He noted that supply chain delays are now as widespread as they were during the 2022 pandemic-induced shortages. The surge in prices for goods and services in May marked the steepest rise since August 2022, signaling a sharp escalation in consumer price inflation.

This tension in the economic landscape was further underscored by recent developments involving major firms and other global economic entities. Ralph Lauren, for instance, revised its annual revenue forecast downward, attributing the decision to uncertainties caused by US tariffs. In the agricultural sector, US high-end livestock breeders have suffered significant financial losses due to the trade conflict with China, which has severely impacted sales of specialized breeding pigs.

The global repercussions of the US's trade policies have not gone unnoticed. Japan has downgraded its outlook on the global economy, citing concerns over the far-reaching impacts of President Trump's tariffs on worldwide trade dynamics. Meanwhile, domestically, twelve US states have taken legal action, challenging the president's use of emergency powers to implement these tariffs, labeling them as undue "blank check" tariffs.

These intertwined economic challenges highlight the complexity of navigating policy-driven market conditions, reflecting a scenario where gains in economic output are offset by rising costs and heightened uncertainties.