Activity across the US manufacturing sector expanded at the briskest rate in 17 months in early February.
That’s according to a preliminary read on S&P Global’s PMIs for the world’s largest economy, released into a frenzied backdrop on Thursday when another blowout quarter from Nvidia competed with the first Nikkei record in a quarter century for space above the digital news fold.
The flash print on the manufacturing PMI was 51.5, up from 50.7 in January and the best reading since September of 2022. The print topped the highest estimate from 18 forecasters. The new orders subindex on the manufacturing side hit 53.5, the best mark since May of 2022, and the employment gauge rose to a five-month high.
On the services side, 51.3 for the flash estimate actually counted as a miss. Economists wanted 52.3. The lowest guess was 51.5. The employment index for services slipped to 50.8. January marked the first time the manufacturing headline print was above the services print since January of last year.
It’s plausible to suggest this was the best possible outcome. Both sides of the economy are still expanding, and upside on the factory gauge is welcome considering manufacturing suffered a prolonged downturn. The services sector if anything needs to cool to keep the disinflation trend intact, so the miss there isn’t necessarily bad news. Notably, the services input price gauge registered the lowest reading since October of 2020.
“The sustained expansion is being accompanied by subdued price pressures,” S&P Global’s Chris Williamson said Thursday. “Although up slightly in February, the survey’s gauge of selling prices for goods and services continues to run at a level consistent with the Fed hitting its 2% inflation target, and a further fall in cost growth to the lowest since October 2020 hints at price pressures remaining subdued in the coming months.”
Here’s hoping. Market participants began to speculate on the prospects for additional rate hikes last week, after upside surprises on both consumer and producer price growth in the US.
Meanwhile, initial jobless claims fell to the lowest in a month. 201,000 was below every estimate.
The four-week moving average is 215,250. The week-to-week decline for the period ending February 10 was the third straight.
Continuing claims for the week to February 3 were 1.862 million. That was below consensus and marked a four-week low.
Bottom line: You can’t make a recession case with this data. Maybe you can with other data, but if that’s your predisposition you’re so far into Chicken Little territory by now that I don’t see why anyone should be expected to take you seriously.
Famous last words? Maybe. But I call ’em like I see ’em. And as ever, the recession/crash crowd enjoys a kind of leeway not afforded to optimists and bulls. Macro doomsayers and market bears are the only broken clocks who get credit for being right twice a day.
