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S&P Global Flash US Manufacturing PMI (May 2023):

• Declined to 48.5, indicating the largest contraction in the manufacturing sector in three months.
• Weak demand and reduced input requirements contributed to the drop, despite improved delivery times.
• Output slowed, but employment saw the most significant increase since September.
• Backlogs fell sharply at the fastest rate in three years.
• Input prices fell for the first time since May 2020, while supplier delivery times improved significantly.
• Optimism regarding future output was the highest in a year, driven by new product development and anticipated client demand uptick.

S&P Global US Services PMI (May 2023):

• Increased to 55.1, up from 53.6 the previous month, surpassing market expectations.
• The rate of activity growth was the fastest in over a year, attributed to increased demand from new and existing clients.
• New orders rose at the fastest rate since April 2022, including solid growth in new export orders.
• Job creation reached its fastest pace in ten months.
• Input prices and output charges increased at rates higher than their respective series averages.
• Confidence improved to the highest level in a year, fueled by hopes of sustained client demand increases.

Overall, the US manufacturing sector experienced a contraction in May, driven by weak demand. However, the services sector showed robust growth, with increased activity, new orders, and job creation. While input prices and output charges rose, firms remained optimistic about the future, anticipating sustained client demand growth and investing in new product development.

The release of mixed data is likely to impact the market, as negative economic indicators, such as the contraction in the manufacturing sector, may influence investors’ perception of the potential for a sooner rate-cut projection. This, in turn, could drive the stock market higher. The presence of elevated interest rates raises concerns of a potential economic slowdown, which generally has a bearish effect on the market. However, the market’s response will depend on how investors interpret the data and assess its implications for the trajectory of monetary policy.

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