Following the tumble in US Manufacturing sector surveys, S&P Global reports that the US Services sector deteriorated marginally in June (to 54.4 from 54.9 in May), but did improve modestly intramonth from the 54.1 flash print. The ISM Services print was expected to rise modestly in June, but instead it soared to 53.9 (vs 51.2 exp). All of this comes amid a surge in positive macro surprises...
Source: Bloomberg
One of these things is not like the other...
S&P Global reports that cost pressures picked up, as a second successive fall in cost burdens at manufacturers was offset by the steepest rise in service sector costs recorded since January. But ISM says the opposite with Prices dropping to the lowest since March 2020
Source: Bloomberg
Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:
"June saw encouraging resilience of the US services economy, which helped offset a renewed contraction of manufacturing output to ensure the overall pace of economic growth remained encouragingly solid.
The surveys signal GDP growth of just under 2% for the second quarter as a whole, albeit with June seeing some loss of momentum.
"Demand for services has remained surprisingly buoyant in the face of headwinds from the increased cost of living and higher interest rates, with spending still being supported by a post-pandemic tailwind for spending by consumers in particular. Higher interest rates and recent market gains are also boosting demand for some financial services.
"The worry is that, although selling price inflation has cooled further, June saw increased cost growth in the service sector, which has been the main area of inflation concern in recent months. Higher wages in particular are driving costs up, and could keep selling price inflation stubbornly elevated in the months ahead."
So slowing economic growth and service sector inflation on the rise... not what Powell ordered!
