Services sector underpins US economy amid manufacturing slowdown : US services sector continues to drive economic growth despite a manufacturing slowdown, with PMI at 55.4. Manufacturing contracts for the third month, but services boost the economy and composite index. Explore the impact on the dollar and Fed policy
Services sector underpins US economy amid manufacturing slowdown
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Preliminary US PMI estimates pointed to further deterioration in manufacturing activity, but the
services sector remained a solid driver of the economy.
The manufacturing PMI fell to 47.0 in September from 47.9 in August and was expected to rise to
48.6. A reading below 50 indicates that activity has been contracting since July. This data contrasts
with the surge in manufacturing activity in August, which the Fed reported last week.
The opposite picture is seen in the services sector, where the latest reading of 55.4 indicates a
continuation of roughly the same expansion rate since May, after a very subdued period from August
to April this year.
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The services reading pulled the composite index above expectations, which seems like good news so
far. The service sector in the US accounts for up to 80% of GDP, and it was already feeling confident
many months before the rate cuts. The Fed’s dovish stance could lead to further acceleration.
Such news will be negative for equities and positive for the dollar only if Fed officials see it as an
excuse to slow the pace of rate cuts. So far, however, the FOMC prefers to celebrate the victory over
inflation.
