Breaking: US S&P Manufacturing PMI improves to 48.8 in November, Composite PMI rises to 55.3

US S&P Global Composite PMI rose to 55.3 in November's flash estimate from 54.1 in October, showing that the business activity in the US' private sector continued to expand at an accelerating pace. 

S&P Global Manufacturing PMI improved to 48.8 from 48.5, highlighting an ongoing contraction, while the Services PMI rose to 57 from 55.

Assessing the survey's findings, "the business mood has brightened in November, with confidence about the year ahead hitting a two-and-a-half year high," Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said.

"The prospect of lower interest rates and a more probusiness approach from the incoming administration has fueled greater optimism, in turn helping drive output and order book inflows higher in November," Williamson added.

Market reaction to US PMI data

 The US Dollar preserves its strength following the PMI data. At the time of press, the USD Index was up 0.55% on the day at 107.65.

 

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This section below was published as a preview of the US S&P Global PMI data at 09:00 GMT.

• The S&P Global preliminary PMIs for November are likely to show little variation from the October final readings.
• Markets are undecided on whether the Federal Reserve will lower the policy rate again in December. 
• EUR/USD remains technically bearish ahead of the PMI data. 

S&P Global will publish the preliminary estimates of the United States (US) Purchasing Managers Indexes (PMIs) for November on Friday. The indexes result from surveys of the senior executives in the private sector. They are meant to indicate the overall health of the economy, providing insights into key economic drivers such as GDP, inflation, exports, capacity utilization, employment and inventories.

S&P Global releases three indexes: the Manufacturing PMI, the Services PMI the Composite PMI, which is a weighted average of the two sectors. Readings above 50 indicate that economic activity in the private sector is expanding, while figures below 50 represent contraction. These indexes are released every month in advance of other official figures, becoming a key leading indicator of the status of the economy.

In October, the S&P Global Composite PMI arrived at 54.1, suggesting that the private sector continued to grow at a healthy pace. “October’s flash US PMI survey signaled a further solid rise in business activity to mark a robust start to the fourth quarter,” S&P Global said in the press release. “Growth was driven solely by the service sector, however, as manufacturing output contracted for a third month running. Meanwhile, employment fell slightly for a third successive month amid uncertainty ahead of the presidential election."

What can we expect from the next S&P Global PMI report?

Investors foresee the flash Manufacturing PMI improving slightly to 48.8 in November from 48.5 and expect the Services PMI to edge higher to 55.3 from 55. 

A poor performance of the manufacturing sector would come as no surprise, and the expected uptick would likely neutralize concerns, particularly if the Services PMI keeps indicating a solid expansion in the sector.

Market participants will scrutinize comments about inflation and employment in the surveys. Following Federal Reserve (Fed) Chairman Jerome Powell’s cautious remarks about further policy easing, markets dialed down expectations for another rate reduction in December. According to the CME FedWatch Tool, the probability of a 25 basis points cut at the last policy meeting of the year currently stands at about 55%, down from above70% early last week.

Powell argued that they don't need to be in a hurry to lower interest rates, citing ongoing economic growth, a solid job market and inflation that remains above the 2% target. "If data let us go slower, that's a smart thing to do," he added. 

In case the Services PMI unexpectedly comes in below 50, the immediate reaction is likely to trigger a US Dollar (USD) selloff. On the other hand, the USD could gather strength against its rivals if the Services PMI remains near the market consensus and the Manufacturing PMI rises into the expansion territory above 50.

Investors could see a stronger chance for a Fed policy hold in December if PMI surveys highlight rising input inflation in the service sector, alongside favorable conditions in the labor market. Conversely, softer price pressures and a lack of growth in private sector payrolls could revive optimism about further policy easing and weigh on the USD.

When will the October flash US S&P Global PMIs be released, and how could they affect EUR/USD?

The S&P Global Manufacturing, Services and Composite PMIs report will be released on Friday at 14:45 GMT and is expected to show manufacturing output is still in trouble while the service sector remains the strongest.

Ahead of the release, Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief technical overview of EUR/USD:

“The near-term technical outlook for EUR/USD remains bearish. The Relative Strength Index (RSI) indicator on the daily chart stays well below 40, while holding slightly above 30, suggesting that the pair has more room on the downside before turning technically oversold.”

“If EUR/USD closes the week below 1.0500 (round level) and confirms that level as resistance, technical sellers could remain interested. In this case, 1.0450 (October 2023 low) could be seen as the next support before 1.0350 (May 2022 low). Looking north, first resistance could be spotted at 1.0600 (static level, round level) before the 20-day Simple Moving Average (SMA) at 1.0700.”