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The latest round of flash manufacturing and services PMI readings from the U.S. economy reflected a faster pace of expansion for both sectors.
- Flash manufacturing PMI for May: 50.9 (50.0 forecast, 50.0 previous)
- Flash services PMI for May: 54.8 (51.2 forecast, previous reading upgraded from 50.9 to 51.3)
S&P Global’s manufacturing PMI for May advanced from 50.0 to 50.9 versus the consensus of holding steady, indicating a stronger pace of growth. Components of the report revealed that both output and employment ticked higher during the month.
According to Chris Williamson, Chief Business Economist at S&P Global Market Intelligence:
“Selling price inflation has meanwhile ticked higher and continues to signal modestly above-target inflation. What’s interesting is that the main inflationary impetus is now coming from manufacturing rather than services… to suggest that the final mile down to the Fed’s 2% target still seems elusive.”
Meanwhile, the services PMI for May jumped from an upgraded 51.3 figure to 54.8, far outpacing the estimate at 51.2 and registering its fastest growth for a year. In addition, services industry activity also chalked up its 16th consecutive monthly expansion.
Link to S&P Global U.S. Flash Composite PMI
Underlying data also showed that service sector costs picked up at a faster rate, driven mainly by higher staffing costs.
Market Reactions
U.S. dollar vs. Major Currencies: 5-min
Overlay of USD vs. Major Currencies Chart by TradingView
The Greenback saw broad weakness leading up to the U.S. flash PMI release, as traders were likely unwinding earlier bullish bets.
Dollar bulls charged upon seeing much stronger than expected results, though, as the upside surprises from both industries likely reinforced hawkish Fed expectations.
From there, the U.S. currency was able to hold on to its gains against its forex rivals before moving mostly sideways for the next few hours.
USD chalked up its biggest wins against CAD, which continues to be bogged down by falling crude oil prices and June BOC cut expectations, and GBP, which seems to be reeling from the downbeat U.K. services PMI released earlier.
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