US manufacturing is beset, but services activity across the world’s largest economy is resilient.

What else is new, right? More to the point: What else is news?

Flash PMIs from S&P Global released into an early summer void on Friday were underwhelming, but mostly inconsequential. Earlier, readings out of Europe suggested the region’s tentative rebound from a shallow winter recession may be fading already, but if we’re being honest (and we rarely are), the financial media attention accorded to the data was almost entirely attributable to a dearth of real stories. When all else fails, pretend the flash PMIs matter.

That’s the sort of grating assessment that irritates those of you toiling thanklessly in the financial media industry. I don’t know what to tell you, though. It is what it is. A living. Only not for long if things keep going the way they’re going with Large Language Models. You better learn how to write satire or otherwise develop a cadence that can’t be reproduced by a Nvidia chip.

Anyway, the flash read on S&P Global’s services gauge for the US in June was 54.1, marginally better than the 54 economists expected. It was 52.7 a year ago. If the Fed is trying to cool the US services sector, it really isn’t working. June was the fifth straight month of expansion. A measure of expectations was the highest in 13 months.

It was a different story on the factory side, though. This is a familiar bifurcation. The 46.3 preliminary print on the manufacturing index materially undershot consensus, although frankly, there’s no utility in citing consensus on these prints  — or on any other prints, really. (Now the economists among you can join the financial journalists in being irritated with me today.)

Assuming the factory index doesn’t improve in the final reading later this month, it’d be the lowest since December. The manufacturing new orders index likewise hit a six-month low. The composite print, at 53, was a miss.

Interestingly, firms saw higher costs this month but were reluctant to pass along the pain to consumers. That’s perhaps indicative of waning pricing power. “Following a loss of momentum in May, price pressures gained intensity in June,” S&P Global said, adding that “the rate of cost inflation across goods and services picked up to a robust pace,” driven in no small part by higher wages across the service sector, but “firms raised their selling prices at the slowest [rate] since October 2020.”

You can look at that one of two ways. One one hand, it’s good for consumers, I suppose. On the other hand, it speaks to the negative operating leverage dynamic that some top-down strategists (including and especially Morgan Stanley’s Mike Wilson) still believe will drive earnings lower over the next quarter or two. If, God forbid, raw materials prices were to inflect higher again against deteriorating consumer demand and sticky wage inflation, then firms would have a real problem on their hands.

The survey mentioned “diverging trends” in demand conditions across manufacturing and services. That found expression in a stark juxtaposition around the outlook. “Confidence dipped to a six-month low among manufacturers amid concerns regarding inflation and lower sales,” the color accompanying the release said. “Services firms, however, reported the strongest level of positive sentiment since May 2022.”

Again, the Fed needs to cool the services sector, where the sticky inflation lives. And it’s just not happening. Further, even the perception of an incrementally less aggressive Fed has the potential to exacerbate the situation. As Chris Williamson, Chief Business Economist at S&P Global, put it Friday, “services demand is proving resilient and the recent pause in rate hikes appears to have helped boost business optimism for the year ahead.”