After expanding in January at the slowest pace since October 2020, the IHS Markit Flash U.S. Manufacturing PMI rebounded in February. The index for future output also improved to the strongest reading since November 2020, pointing to optimism about production moving forward despite ongoing supply chain bottlenecks, workforce shortages and pricing pressures.

The U.S. economy jumped 7.0% at the annual rate in the fourth quarter, up from the 2.3% gain seen in the third quarter. The data also show negative impacts from ongoing supply chain disruptions and the spread of the omicron virus, with weaker-than-desired spending on consumer goods and business investment. In addition, reduced fiscal stimulus has led to a drag from government for three straight quarters.

Overall, the U.S. economy rebounded very strongly in 2021, with real GDP soaring 5.7% following the 3.4% decline seen in 2020. The current forecast for 2022 is for 3.8% growth. However, in the first (or current) quarter, growth will be just 1.5%, largely on omicron, supply chain and pricing pressure challenges.

The events in Russia and the Ukraine pose a notable downside risk to global growth, which could impact the outlook moving forward, although the extent of this threat will hinge on what happens in the coming days and weeks.