After European PMIs plunged this morning, US PMIs (preliminary for June) were expected to decline (both Services and Manufacturing).
US Manufacturing PMI tumbled to 46.3 from 48.4 – that is the lowest since Dec 2022 (which equals lowest on record)
US Services PMI dropped to 54.1 from 54.9
Commenting on the US flash PMI data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:
“Growth remains dependent on service sector spending, however, with manufacturing slipping back into decline after three months of growth. While improving supply conditions had helped boost manufacturing production in prior months, an increasingly severe downturn in new orders mean factories are running out of work.
“The situation is brighter in the service sector, where demand is proving resilient and the recent pause in rate hikes appears to have helped boost business optimism for the year ahead.
“The tightness of the labor market remains a concern, and upward wage pressure remains a key driver of higher costs in the service sector.
However, it is encouraging to see the overall rate of selling price inflation for goods and services drop to the lowest since late 2020 in a sign that the Fed is winning its fight against inflation.”
“The question remains as to how resilient service sector growth can be in the face of the manufacturing decline and the lagged effect of prior rate hikes. Any further rate hikes will of course have a further dampening effect on this sector which is especially susceptible to changes in borrowing costs.
Finally, Williamson notes that “The overall rate of expansion of business activity in the US remained robust in June, consistent with GDP rising at a rate of 1.7% to put second quarter growth in the region of 2%.”
As we noted earlier, US macro data has actually been surprising to the upside (modestly) in recent weeks (while Europe’s is plunging)…
Europe, for now, remains the weakest economic bloc (based on PMIs)…
…but the upward trend of global PMIs since the start of the year has clearly broken.