In this post we will examine the latest economic reports from the United Kingdom and the United States. These reports provide valuable insight into the current state of both economies, with implications for investor sentiment and decision-making.
Services PMI
The UK Services PMI for March registered at 52.9, meeting expectations and demonstrating growth for the second consecutive month. This growth was primarily driven by a substantial increase in new orders and the most significant expansion in export sales in at least eight-and-a-half years. Although operating cost inflation moderated to a 22-month low, it remained exceptionally high compared to historical norms. The ongoing recovery in client demand boosted business confidence to its highest level since March 2022.
United States
MBA 30-Year Mortgage Rate
The average contract interest rate for 30-year fixed-rate mortgages in the US decreased to 6.4%. This decline continues the trend observed since the week ending February 10th; however, the rate remains high in comparison to recent history. The average interest rate for 30-year fixed-rate mortgages with jumbo loan balances (greater than $726,200) increased to 6.36% from 6.27%. The divergence in rates implies that banks might be tightening credit in response to recent challenges.
ADP Employment Change
US private businesses created 145K jobs in March, following an upwardly revised 261K in February. With consumer demand waning, the labor market has started to slow down. The services sector added 75K jobs, while the goods-producing industry added 70K jobs. Nela Richardson, Chief Economist at ADP, stated that "employers are pulling back from a year of strong hiring and pay growth, after a three-month plateau, is inching down." Annual pay growth for employees remaining in their jobs slowed to 6.9%, marking the lowest level in over a year.
Composite PMI
The S&P Global US Composite PMI, which measures the combined performance of both the manufacturing and services sectors, recorded a reading of 52.3 in March. Although revised lower, the figure still exceeded February's results, indicating a modest rise in business activity. The most recent data revealed the sharpest increase in output since June 2022, driven by the first expansion in new business since last September. While domestic demand continued to bolster the increase, new export orders experienced a decline. Despite stronger demand conditions, business confidence fell below the series average and dipped from February due to inflation concerns. Input costs rose at the second-slowest pace since October 2020.
ISM Non-Manufacturing PMI
The ISM Services PMI for March fell to 51.2, significantly below the forecasted 54.5. This reading suggests the slowest growth in the services sector in three months, resulting from a cooling off in demand. Price pressures eased to their lowest level since September 2020. Nevertheless, the majority of companies maintain a positive outlook on business conditions.
Conclusion
Today's economic reports indicate a common theme of modest growth, albeit with varying degrees of success. While the UK Services PMI and US Composite PMI show promising expansion in new orders and output, the US labor market and demand conditions exhibit signs of slowing down. Price pressures and inflation concerns have somewhat eased, but still persist as challenges in both the UK and US economies. Overall, investor sentiment is likely to be cautiously optimistic, as businesses continue to navigate the delicate balance between growth and inflationary pressures.
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