U.S. Manufacturing PMI Drops To 46.3 As Price Pressures Gain Intensity

Key Insights

• Manufacturing PMI declined from 48.4 in May to 46.3 in June. 
• Services PMI decreased from 54.9 to 54.1.
• SP500 tested session lows as traders focused on the weakness of the manufacturing segment. 

On June 23, S&P Global released the flash reading of U.S. PMI reports. The reports showed that Manufacturing PMI declined from 48.4 in May to 46.3 in June, compared to analyst consensus of 48.5. Numbers below 50 show contraction.  Services PMI declined from 54.9 to 54.1, while analysts expected that it would fall to 51.

S&P Global noted that U.S. economic upturn slowed in June as dependence on services increased. According to the report, “Manufacturers reported a renewed contraction in production while service providers saw a slower, but still solid, upturn in output.”

Importantly, S&P Global noted that price pressures gained intensity in June, and the rate of cost inflation across goods and services picked up to a robust pace. This data shows why the Fed remains hawkish and is expected to raise the federal funds rate at the next meeting in July.

SP500 made an attempt to settle below the 4350 level after the release of the PMI reports. Traders are worried that the hawkish Fed will put too much pressure on the economy. Treasury yields are moving lower today, but it looks that this move is mostly driven by rising demand for safe-haven assets, which is bearish for stocks and other riskier assets.

U.S. Dollar Index moved back towards the 102.90 level. The U.S. dollar continues to rebound against a broad basket of currencies as traders focus on the hawkish Fed.

Gold settled near the $1935 level, supported by lower Treasury yields and rising demand for safe-haven assets.

For a look at all of today’s economic events, check out our economic calendar.