US July flash services PMI 56.0 vs 55.0 expected

• Services PMI 56.0 vs. 55.0 expected and 55.3 prior.
• Manufacturing PMI 49.5 vs. 51.7 expected and 51.6 prior.
• Composite PMI 55.0 vs. 54.8 prior.

Key Findings:

• Flash US PMI Composite Output Index(1) at 55.0
  (June: 54.8). 27-month high.
• Flash US Services Business Activity Index(2) at 56.0
  (June: 55.3). 28-month high.
• Flash US Manufacturing Output Index(4) at 49.5
  (June: 52.1). 6-month low.
• Flash US Manufacturing PMI(3) at 49.5 (June: 51.6).
  7-month low.

Comment:

Commenting on the data, 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.”

This article was written by Giuseppe Dellamotta at www.forexlive.com.