The PMI index from the United States for August was released just now. This data is initially expected to show a small increase in the manufacturing sector index as well as a small decrease in the services index.
However, the actual data was more in line with the tone set by the European PMI earlier today and also fell short of expectations. The manufacturing index was the most disappointing as it fell from 49.3 to 47.0. Slightly positive, it should be noted that although the service index did not meet expectations, it managed to stay above 50 points for (in contrast to the European services PMI).
A reduction in new orders was seen at both service providers and manufacturers, S&P said. Cost pressures also contributed to the lower reading as input price inflation rose due to higher costs of fuel, wages, and raw materials.
"Business activity seen stagnant in August casts doubt on the strength of US economic growth in the third quarter," said Chris Williamson, economist at S&P Global Market Intelligence. "The survey shows that the dominance of growth by the services sector in the second quarter has faded, accompanied by a further decline in factory output."
Nevertheless, this is a supportive reading from the Fed's point of view and the market reacted accordingly. The USD is seen to shrink to a trading level of 103.48 and equities are strengthening.
PMI
Manufacturing: 47.0 vs. 49.3 expectations (previously 49.0)
Services: 51.0 vs. 52.2 expected (previously 52.3)
Composite: 50.4 vs. 51.5 expected (previously 52.0)
The euro jumped against the US dollar to trade at 1.0849 after the US PMI missed expectations and has now recovered more than half of the losses made after the disappointing PMI release from Europe earlier today.
