Following Europe's PMI slump to six-month lows this morning, US Composite PMI rose to a six-month high, with Manufacturng surprising to the upside (4-mo high). The stronger PMI reading was supported by accelerated growth in output, new orders, employment and stocks of inputs during July, but the principal weak spot in the economy remained exports, with foreign goods orders dropping.
As 'hard' US economic data has drastically disappointed over the last three months, Services (higher) and Manufacturing (lower) based on Markit's PMI survey have diverged markedly until today's July print which saw manufacturing catch up...
Commenting on the flash PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“The July PMI surveys show an economy gaining growth momentum at the start of the third quarter, enjoying the strongest monthly improvement in business activity since January.
“Most encouraging was an upturn in new order inflows to the second-highest seen over the past two years, which helped push the rate of job creation to the highest so far this year, indicative of non-farm payrolls growing at a rate of around 200,000.
“The principal weak spot in the economy remained exports, with foreign goods orders dropping – albeit only marginally – for the first time since last September, often blamed on the strength of the dollar.”
“The overall rate of expansion remains modest rather than impressive. The surveys are historically consistent with annualized GDP growth of approximately 2%, but the signs are that growth could accelerate further in coming months.
We leave you with UBS' comment which seemed to sum things up rather well:
Manufacturing purchasing managers' opinion polls are due. Markets and media love this data. Including preliminary data, it is out twice a month. There is lots of it. There is lots of superficially interesting details. The fact that the correlation of this data to reality has collapsed does not seem to matter - it is something to talk about.