After a hopeful start to the year - despite the weather, the West Coats ports, and every other excuse - US Services PMI has slipped the last 2 months, back to the lowest since January. At 56.4, below expectations, this is the biggest 2-month drop since December. Input prices edged up to 9-month highs. This is the first YoY drop in the Services PMI since December. As Markit proclaims hopefully, "policymakers will be eager to see if this slower growth trend develops further over the summer months before risking any tightening of policy."
Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said:
“The US economy looks to have grown at a healthy pace in May, providing further evidence that the rate of expansion has picked up from the weak start to the year. The resilience of domestic demand in particular helped encourage companies to take on extra staff at the fastest rate for almost a year.
“An upturn in business optimism to a six-month high also bodes well for robust growth to be sustained in coming months.
“The survey data put the economy on course to rebound in the second quarter, with GDP rising at an annualised rate of around 3%, with non-farm payroll growth continuing to run around the 200,000 level.
“Such keen hiring and robust economic growth inevitably tips the scales in favour of the Fed hiking rates later this year rather than waiting until 2016.
“However, the rate of expansion remains below the buoyant rates seen throughout much of last year, as slower growth of service activity has been accompanied by a slowdown in the manufacturing sector, which has seen exporters hit by the stronger dollar. Policymakers will be eager to see if this slower growth trend develops further over the summer months before risking any tightening of policy.”