Today investors were served another weak readings from the US, which deepened stagflation fears.
- S&P Global US Manufacturing PMI fell to 57.5 in May from 59.2 in April, below analysts ’estimates of 57.9 expected. Output and new orders rose strongly, alongside a faster upturn in employment and longer supplier lead-times. Inflationary pressures remained substantial, with input costs rising at the sharpest pace since November 2021. Output charges rose at the third-steepest pace on record as a result. Meanwhile, business sentiment was the lowest for seven months as hopes of new client acquisitions and greater demand were dampened by inflationary fears.
- S&P Global US Services PMI decreased to 53.5 in May, below 57.4 expected and down from 55.6 in April weighed down by hikes in selling prices and concerns over higher interest rates. The rate of growth in new sales was the slowest since August 2020 and below the series average. On the price front, service providers registered the fastest rise in input prices on record in May while the rate of charge inflation eased from April's record high and was the slowest for three months.
US Services PMI fell to the lowest in four months, while manufacturing PMI recorded the slowest growth in factory activity in three months. Source: Bloomberg via ZeroHedge
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Create account Try a demo Download mobile app Download mobile app- New home sales in the US plunged 16.6% MoM to a seasonally adjusted annual rate of 591K in April, the lowest since April of 2020 and well below analysts ’estimates of 750k, as rising construction and mortgage costs weigh on buyers' affordability.
New home sales fell to the lowest since April of 2020, while the median prices jumped by 19.6% YoY (USD 450.6k), the average by 31.2% y / y (USD 570.3k). Source: ZeroHedge
Both PMI indexes are still above 50 and signal 'growth', while price pressures remain elevated, which may push FED to raise rates at a faster pace. On the other hand the housing market is weakening therefore price correction cannot be ruled out. This would dampen confidence, however could lower inflation significantly since housing and shelter categories have a large impact on the CPI reading. This in turn would allow the Fed to move to a more neutral position. Nevertheless, today's data show that the US economy is not in the best condition and inflation continues to rage, which puts the Fed in a difficult situation.
