US PMIs Skyrocket to a 5-Year High

Overview

The latest Purchasing Managers' Index (PMI) figures for the United States have shown significant growth, surpassing market expectations and reaching levels not seen in five years. The Composite PMI printed at 58.4, well above the consensus of 55.3 and the previous month's figure of 56.0. The Services PMI also exceeded expectations at 58.7, compared to a consensus of 55.8, while the Manufacturing PMI came in at 57, against a forecast of 53.7.

Market Reaction

Following the release of the PMI data, the EUR/USD currency pair experienced a downward trend, falling below the key psychological level of 1.14. This decline was supported by increasing expectations for Federal Reserve interest rate hikes. Additionally, major stock indices such as the S&P 500 and Nasdaq 100 saw losses after the market opened.

Detailed Analysis

The acceleration in economic activity marks the fourth consecutive month of growth, with the current pace being the fastest since mid-2021. Both the services and manufacturing sectors reported a marked increase in new orders, with services growth reaching its highest since March 2022 and manufacturing growth since April 2022.

However, exports have shown weakness, particularly in the services sector, where new export orders have declined. The labor market has seen a notable improvement, with firms hiring at the fastest rate in over four years to manage the increasing backlog of orders. This backlog has risen at its fastest rate since May 2022, indicating higher capacity utilization.

Cost pressures have intensified, with input costs rising at the fastest rate in four years, primarily due to increased fuel and transport costs. Companies are passing these costs onto consumers, leading to higher selling prices and a worsening short-term inflation outlook. S&P Global estimates that the current pace of economic growth corresponds to an annualized GDP growth rate of approximately 5%, suggesting a robust conclusion to the third quarter of the year.