US PMI manufacturing dropped to 54.6 in June, down from 56.4, below expectation of 56.2. PMI services dropped to 56.5, down from 56.8, but beat expectation of 54.9. PMI composite dropped to 56.0, down from 56.6, hit a two-month low.
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“The flash PMI surveys add to evidence that the US economy is enjoying a strong second quarter. Despite growth cooling slightly in June, the latest numbers round off the best quarter for three years, and suggest economic growth has lifted markedly higher than the 2.3% rate of expansion seen in the first quarter to well over 3%.
“The upturn also continues to create new jobs in encouragingly high numbers. The employment gauges from the June surveys are running at levels indicative of non-farm payrolls rising by 190,000, with hiring remaining solid in both the services and manufacturing sectors.
“Price pressures remain elevated, however, widely blamed on a mix of rising fuel prices and tariff-related price hikes, as well as supplier’s gaining pricing power as demand outstrips supply for many inputs.
“Risks are tilted to the downside for coming months. Business expectations about the year ahead have dropped to a five month low, led by the weakest degree of optimism for nearly one and a half years in manufacturing. Exports are back in decline, showing the worst performance for over two years, causing factory order book growth to slump sharply lower compared to earlier in the year.
“For the first time this year, factory output is growing faster than order books, suggesting production may be adjusted down in coming months. Inflows of new business into the service sector have meanwhile cooled to the weakest since January. Finally, although employment is still rising strongly, even here there are signs of weakness, with the latest rise in payrolls being the lowest for a year.”
