US economic activity picked up further in early June, preliminary PMIs released on Friday showed.
S&P Global’s services gauge topped estimates and unexpectedly rose from May. Indeed, at 55.1, the services print was the best in over two years. The composite index likewise printed a 26-month high at 54.6.
“Services activity recover[ed] strongly YTD after near[ly] stall[ing] in late 2023,” the color accompanying the release said, flagging robust domestic demand which drove the strongest new work inflows in 12 months.
The factory gauge beat too, ticking higher to 51.7 in the flash estimate for this month.
These prints aren’t consistent with a slowdown narrative that was otherwise gathering adherents amid a spate of soft releases and misses which collectively drove Bloomberg’s US economic surprise index to a five-year low recently. Friday’s readings suggest the US economy’s expanding at a 2.5% pace, give or take, healthy to be sure.
Chris Williamson, S&P Global’s chief business economist, painted an unequivocally rosy picture. The world’s largest economy expanded at the fastest pace in over two years early this month, he declared. For once, the pickup in activity didn’t translate into higher selling prices which “cooled again after ticking higher in May,” and now sit at “one of the lowest levels seen over the past four years.”
By contrast, S&P Global’s services gauge for Europe slipped to a three-month low at 52.6 in the first readout for June, also released on Friday.
The manufacturing gauge printed an abysmal 45.6, the worst in six months.
Europe’s ostensible manufacturing recovery may be “ending before it began,” Cyrus de la Rubia, Chief Economist at Hamburg Commercial Bank, which co-produces the European PMIs, sighed. “The services sector continues to keep the Eurozone afloat.”
De la Rubia offered a mixed assessment of the inflation outlook in the eurozone following the first ECB cut of the cycle. Although the data on prices pointed to “easing pressure” in the services sector, German service providers raised their selling prices “at a sharper rate” this month.
At the same time, de la Rubia fretted that European factories may see “a return of selling price inflation as input prices in the region increased in June for the first time since February 2023.”
