US Services Sector Unexpectedly Plunges In June As Manufacturing Survey Hits Record High

Despite the serial disappointment in hard economic data, 'soft' survey data has continued to soar in 2021 but analysts expected today's Markit PMIs to retrace some of those gains. However, reality was notably different withManufacturing jumping more than expected as Services plunged...

• Markit US Manufacturing rose to 62.6(from 62.1) beating expectations of 61.5.
• Markit US Services plunged to 64.8(from 70.4) hugely missing expectations of 70.0.

Source: Bloomberg

That is thelowest reading since March for Servicesand highest reading ever for Manufacturing.

Employment issues remained prevalentduring June, as numerous panellists mentioned difficulties finding suitably trained candidates for current vacancies.

Price pressures also remained elevated in June.The rate of input price inflation softened slightly but was the second-fastest on record. Manufacturers continued to note rapid increases in raw material and fuel costs, whilst service providers highlighted higher wage bills to attract workers plus greater transportation fees and fuel costs.

US continues to be the world's "strongest" economy based on these soft surveys, even as the US Composite PMI dropped to 63.9...

Source: Bloomberg

Commenting on the PMI data, Chris Williamson,Chief Business Economist at IHS Markit, said:

“The early PMI indicators point to further impressive growth of the US economy in June, rounding off an unprecedented growth spurt over the second quarter as a whole.

“While both output growth and inflows of new orders have come off their peaks in both manufacturing and services, this is as much due to capacity constraints limiting firms’ abilities to cope with demand rather than any cooling of the economy.

“Although price gauges have also slipped from May’s all-time highs, it’s clear that the economy continues to run very hot. Prices charged for goods and services are still rising very sharply, record supply shortages are getting worse rather than better, firms are fighting to fill vacancies and manufacturers’ warehouse stocks are being depleted at a worrying rate as firms struggle to meet demand.

“While the second quarter will likely represent a peaking in the pace of economic growth, a concomitant peaking of inflation is far less assured.”

So - what happens next? Does all that "hope" collapse back to reality? Or is "hope" the new strategy?

Source: Bloomberg

Get back to work Mr.Powell and make it so!