US S&P Global PMIs Rise More Than Expected: Price Pressures Send Hawkish Signals To Market

The Purchasing Managers' Index (PMI) flash estimates for both manufacturing and services activity in the U.S., as measured by S&P Global, climbed in April, showing economic expansion and positively surprising analysts' expectations.

What To Know

• The U.S. Services PMI rose from 52.6 points in March to 53.7 points in April — above expectations of 51.5.
• The S&P Global US Manufacturing PMI jumped from 49.2 in March to 50.4 in April 2023, above projections of 49 and signalling the first increase in factory activity in six months.
• The S&P Global US Composite PMI increased to 53.5 in April 2023, up from 52.3 the previous month, signaling the fastest increase in business activity since May 2022.
• Services activity growth hit a 12-month high and manufacturing activity grew slightly.
• For the first time in six months, new sales increased, and the rate of job creation increased to the fastest since September 2022.
• Operating expenses climbed at the fastest rate since last November.
• Selling prices increased at a rapid and historically high rate.
• Confidence for output in the future year reached a three-month-high.

Business Activity Regains Momentum, But Inflation Continues To Sting

"The latest survey adds to signs that business activity has regained growth momentum after contracting over the seven months to January," Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said. "The latest reading is indicative of GDP growing at an annualized rate of just over 2%."

Meanwhile, the "upturn in demand" has been accompanied by "a rekindling of price pressures," Williamson said. 

"Average prices charged for goods and services rose in April at the sharpest rate since September of last year, the rate of inflation having now accelerated for three successive months," he added.

Why It Matters: The Federal Reserve might have the green light to continue raising interest rates due to a robust economy, healthy labor market, and strong business confidence, as well as the resurgence of inflationary pressures. 

Market Reactions: Markets were volatile on Friday. Major U.S. equity indices traded in the red on Friday:

• The SPDR S&P 500 ETF Trust SPY was 0.3% as of this writing.
• U.S. Treasury yields surged by about 4 basis points across maturities following the better-than-expected PMI prints. 
• The two-year yield traded at 4.19%, while the 10-year benchmark yield rose to 3.57%.
• The iShares 20+ Year Treasury Bond ETF TLT tumbled nearly 1% following the data. 

Next: BofA Sees 20% Downside In EU Stocks As Markets Realign With Reality And Analysts Turn Bearish Citing Recession Risks

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