US growth slowed in May as inflation, supply chain problems bite
- S&P Global Services PMI drops to 53.5 in May, weakest since January.
- Manufacturing PMI is unchanged at 57.5, down from 59.2.
- Consumer demand under pressure from inflation, rising interest rates.

The US economy faded in May as demand weakened under persistent high inflation and the scarcity of some consumer goods.
The S&P Global Services Purchasing Managers’ Index (PMI) fell to 53.5 this month from 55.6 in April. The consensus estimate from the Reuters Survey of analysts was 55.2. It was the weakest reading since January, though above the 50 dividing line between expansion and contraction.
Services PMI
Manufacturing PMI came in as forecast at 57.5, but it was down from April’s seven-month high of 59.2.
"Companies report that demand is coming under pressure from concerns over the cost of living, higher interest rates and a broader economic slowdown," noted Chris Williamson, chief business economist at S&P Global in the accompanying statement.
Survey respondents reported few signs of slackening inflation pressure. Service sector input prices climbed at the fastest pace in the series history while the rate of manufacturing costs increases were among the fastest on record.
Manufacturers also reported strong order books and some lessening of supply and labor shortages.
"Cost pressures have risen to a new survey high which, alongside the encouraging output and employment numbers, will fuel further speculation about the need for further imminent aggressive rate hikes," Mr. Williamson said.
US markets
Treasury yields fell in Tuesday trading as credit markets are sensitive to any economic data that might inhibit the Federal Reserve’s tightening policy.
The 10-year Treasury return lost 10.5 basis points to close at 2.754%. It was the lowest close for this benchmark note since April 13. The 2-year Treasury shed 14.6 points to 2.479% and the 30-year or long bond dropped 9.9 points to 2.967%.
Equities were mixed on the close but the three major averages had improved substantially from intra-day losses.
The Dow gained 48.33 points, 0.15% to 31,928.62. The S&P 500 lost 32.27 points, 0.81% to 3,941.48. The NASDAQ was the big loser, dropping 270.83 to 11,264.45.
The US dollar was down in all major pairs as falling Treasury yields undercut performance and the miss in the PMI services number was not sufficient to excite the safety trade.
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Author

Joseph Trevisani
FXStreet
Joseph Trevisani began his thirty-year career in the financial markets at Credit Suisse in New York and Singapore where he worked for 12 years as an interbank currency trader and trading desk manager.

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