US PMI Manufacturing fell from 51.6 to 49.5 in July, a 7-month low. PMI Services jumped from 55.3 to 56.0, a 28-month high. PMI Composite rose from 54.8 to 55.0, a 27-month high.
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:
“The flash PMI data signal a ‘Goldilocks’ scenario at the start of the third quarter, with the economy growing at a robust pace while inflation moderates.
“Output across manufacturing and services is expanding at the strongest rate for over two years in July, the survey data indicative of GDP rising at an annualized rate of 2.5% after a 2.0% gain was signaled for the second quarter.
“The rate of increase of average prices charged for goods and services has meanwhile slowed further, dropping to a level consistent with the Fed’s 2% target.
“The good news is qualified, however, with both the growth and inflation pictures containing some worrying elements to monitor in the coming months.
“From the output perspective, growth has become worryingly skewed, with manufacturing slipping back into contraction as the service sector gains further strength. Some of the production decline was linked to staff shortages, so could prove temporary – something which is supported by the sector reporting improved confidence about future growth prospects. However, both manufacturers and service providers are reporting heightened uncertainty around the election, which is dampening investment and hiring.
“In terms of inflation, the July survey saw input costs rise at an increased rate, linked to rising raw material, shipping and labour costs. These higher costs could feed through to higher selling prices if sustained, or cause a squeeze on margins.”
