US Services PMI Rises to 55.3 in June 2024, Highest Growth Since April 2022

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US Services PMI Hits 55.3 in June 2024, Marking Highest Growth Since April 2022

Team FS

03/Jul/2024

Key Points:

US Services PMI rose to 55.3 in June 2024, up from 54.8 in May and surpassing market expectations.

The data shows the sharpest expansion in the services sector since April 2022.

Inflows of new work and employment levels saw significant increases, while input inflation fell to a five-month low.

The S&P Global US Services PMI increased to 55.3 in June 2024 from 54.8 in May, surpassing the preliminary estimate of 55.1 and firmly beating market expectations of 53.7. This marks the sharpest expansion in the services sector since April 2022, indicating a strong rebound in economic activity.

This rise in the Services PMI stands in contrast to recent indicators suggesting that economic activity in the US was moderating. The stronger-than-expected data provides the Federal Reserve with more leeway to maintain interest rates at restrictive levels if inflation does not slow down further.

During this period, inflows of new work rose at the sharpest pace in a year, leading to an expansion in output. This surge in new work reflects increased demand for services, signaling a robust economic environment. Consequently, employment levels increased the most in five months, rebounding from declines observed in the second quarter. This rebound indicates that firms are aiming to boost capacity and address the recent rise in outstanding work.

On the price front, input inflation fell to a five-month low, suggesting that cost pressures are easing for service providers. This decline in input inflation is a positive development, as it could help moderate overall inflationary pressures in the economy.

The strong performance of the US services sector, as highlighted by the rise in the PMI, underscores the resilience and growth potential of this critical part of the economy. The services sector, which encompasses a wide range of industries including finance, healthcare, and retail, plays a vital role in driving overall economic growth and employment.

The positive PMI data also suggests that the services sector is recovering from the challenges faced during the second quarter. With firms ramping up capacity and employment levels rising, the sector is well-positioned to continue its growth trajectory in the coming months.

However, the contrast between the robust services PMI and other indicators of moderating economic activity presents a nuanced picture of the US economy. While the services sector is showing strong growth, other parts of the economy may be experiencing slower expansion. This mixed economic landscape will be a key factor for the Federal Reserve to consider as it formulates its monetary policy decisions in the coming months.

In summary, the increase in the US Services PMI to 55.3 in June 2024 reflects the sharpest expansion in the services sector since April 2022. The rise in new work inflows and employment levels, along with the decline in input inflation, indicates a robust and growing services sector. This strong performance provides the Federal Reserve with additional flexibility to maintain interest rates at restrictive levels if inflation does not show signs of slowing. The resilience of the services sector will be crucial in supporting overall economic growth in the US.

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US Services PMI Hits 55.3 in June 2024, Marking Highest Growth Since April 2022

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