US business activity heats up as pre-holiday consumer mood cools
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US BUSINESS ACTIVITY HEATS UP AS PRE-HOLIDAY CONSUMER MOOD COOLS
Investors are heading into the weekend with good and less-good economic news to chew on.
First the good: business activity in the United States has gathered some velocity in November.
S&P Global has issued its advance "flash" purchasing managers' indexes (PMI) for the manufacturing USMPMP=ECI and services USMPSP=ECI sectors.
The manufacturing side improved nominally, as expected, adding 0.3 point to 48.8, but remaining below the magic level of 50 for the fifth month running, indicating that factory activity has been in contraction since July.
Services also improved, jumping a robust 2 points to an even 57, landing to the north of the 55.2 consensus and notching its highest level since March 2022.
These two metrics combined form a composite reading USPMCF=ECI of 55.3, a 1.2-point acceleration to the upside.
"The prospect of lower interest rates and a more pro-business approach from the incoming administration has fueled greater optimism," says Chris Williamson, chief business economist at S&P Global. "The rise in the headline flash PMI indicates that economic growth is accelerating in the fourth quarter, while at the same time inflationary pressures are cooling."
Separately, consumers aren't quite as jolly this month as originally thought.
The University of Michigan (UMich) unveiled its final take on current month consumer sentiment USUMSF=ECI defying analyst expectations by lowering the headline number by 1.2 points to 71.8, or 1.9 points to the south of the predicted 73.7.
Breaking things down, survey respondents' assessment of their current situation was 0.8% below UMich's preliminary take, while near-term expectations was downwardly revised by a significant 2.0%.
"Post-election interviews were 1.3 points below the pre-election reading, moderating the improvement seen earlier in the month," writes Joanne Hsu, UMich's director of Consumer Surveys.
"Overall, the stability of national sentiment this month obscures discordant partisan patterns," Hsu adds. "The expectations index surged for Republicans and fell for Democrats this month, a reflection of the two groups’ incongruous views of how Trump’s policies will influence the economy."
One-year inflation expectations stood pat at 2.6%, or 60 basis points hotter than Powell & Co's 2% target.
But on longer-term basis, survey participants' five-year inflation expectations added some heat, rising 10 basis points to 3.2%.
While UMich inflation expectations can provide clues regarding consumer spending plans, they are not reliable predictors of actual inflation, as seen in the chart below, which shifts one-year expectations 12 months forward and charts it against core CPI.
Interestingly, however, the November 2023 reading of one-year inflation expectations very nearly got it right:
(Stephen Culp)
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FOR FRIDAY'S EARLIER LIVE MARKETS POSTS:
MAIN US INDEXES MIXED, BUT HEADED FOR WINNING WEEK - CLICK HERE
S&P 500 INDEX: BACK ON TRACK FOR NEW HIGHS? - CLICK HERE
A 50-BPS ECB CUT IN DECEMBER? DISCOURAGING EURO ZONE PMI KEEPS MARKETS GUESSING - CLICK HERE
UK CONSUMER SENTIMENT DOWN POST-LABOUR BUDGET - JP MORGAN - CLICK HERE
MICROSTRATEGY'S SHARE TURNOVER TOPS TECH GIANTS AS BITCOIN ON VERGE OF $100,000 -CLICK HERE
AS SOME TRUMP TRADES LOSE STEAM, WHAT HAPPENS NEXT? - CLICK HERE
MORE BUYBACKS BRIGHTEN ASIA'S BELOW EXPECTATIONS Q3 EARNINGS - HSBC - CLICK HERE
TECH, REAL ESTATE LEAD STOXX 600 HIGHER - CLICK HERE
EUROPEAN EQUITY FUTURES HIGHER, PMIS IN FOCUS - CLICK HERE
BITCOIN WATCH PARTY RAGES ON AS PMIS LOOM - CLICK HERE
Flash PMI https://reut.rs/3AQ1oRp
UMich https://reut.rs/3OpU8yw
UMich inflation expectations https://reut.rs/4hTwyrA
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