- Preliminary services PMI versus 50.7 last month
- Manufacturing 51.5 vs 50.5 expected
- Prior manufacturing was 50.7
- Composite PMI 51.4 vs 52.0 prior
- input prices rose at the weakest pace since October 2020
- The rate of cost inflation slowed at both manufacturers and service providers
- The overall rise in output charges was historically muted, and the second-slowest since June 2020
This is a miss but it's still above 50 on both manufacturing and services so the numbers continue to point to a soft landing. The commentary in the survey on the inflation outlook was dovish, so that should weigh on the US dollar.
Commentary in the report:
“The early PMI data for February indicate that the US economy continued to expand midway through the first quarter, pointing to annualized GDP growth in the region of 2%. Although service sector growth cooled slightly, manufacturing staged a welcome return to growth, with factory output growing at the fastest rate for ten months.
“Better weather conditions compared to January trumped shipping concerns, helping drive an overall improvement in supplier delivery times, which in turn facilitated higher factory production. Signs of inventory reduction policies becoming less widespread also helped boost production and sustain high levels of business confidence in the outlook for the year ahead among manufacturers.
“Service sector growth has slipped slightly, however, as has confidence in the year-ahead outlook among service providers, in part reflecting some pull back in the extent to which interest rates are expected to fall in 2024. It is nevertheless welcome news that both manufacturing and services are expanding again for the first time in three months.
“The sustained expansion is being accompanied by subdued price pressures. Although up slightly in February, the survey’s gauge of selling prices for goods and services continues to run at a level consistent with the Fed hitting its 2% inflation target, and a further fall in cost growth to the lowest since October 2020 hints at price pressures remaining subdued in the coming months.”
There is a lot to like here from the Fed's perspective and for the broader market.
