Rise Above 50: Manufacturing PMI Rebounds in January

U.S. PMI reports exceeded analyst predictions, showcasing the robustness of the U.S. economy.

Highlights

• Manufacturing PMI rose from 47.9 in December to 50.3 in January.
• Services PMI expanded from 51.4 to 52.9.
• Composite PMI increased from 50.9 to 52.3.  

On January 24, 2024, S&P Global released preliminary PMI data for January.

The Manufacturing PMI increased from 47.9 in December to 50.3 in January, surpassing the analyst consensus of 47.9, indicating an expansion. However, the report noted that the improvement in operating conditions was accompanied by a further decrease in production.

Services PMI climbed from 51.4 in December to 52.9 in January, contradicting analysts' expectations of a decline to 51. Meanwhile, Composite PMI also rose from 50.9 to 52.3, comfortably exceeding analyst estimates.

S&P Global remarked, "The flash PMI data suggests a promising beginning for the U.S. economy, with companies reporting a significant acceleration in growth alongside a notable reduction in inflation pressures."

Following the release of these reports, Treasury yields experienced an increase. The strong state of the U.S. economy provides the Federal Reserve with an opportunity to maintain elevated interest rates to alleviate inflationary pressures.

The U.S. Dollar Index surged above the 103.00 level in response to the PMI data, with rising Treasury yields offering substantial support to the American currency.

Gold retreated below the $2025 level as robust U.S. economic data weighed on the precious metal markets.

The S&P 500 relinquished some of its session highs following the PMI reports. The Fed's policy outlook is a major driver for the S&P 500, and it remains to be seen whether the index will experience downward momentum as market participants assess the strength of the U.S. economy while potentially disregarding rising Treasury yields.