US PMIs Suggest “Weak GDP Growth” In Q4, Prices Remain “Elevated”

After dismal data from Europe, which followed earlier PMI numbers from Australia which pointed to a less steep decline, and a gauge for Japan which signaled a return to growth, the Composite US PMI was expected to decline modestly in preliminary December data.

Instead it rose modestly, from 50.7 to 51.0 (50.5 exp) thanks to a big improvement in Services (to 51.3 from 50.8) which outweighed further weakness in Manufacturing (down to 48.2 from 49.4)…

Source: Bloomberg

The early PMI data indicate that the US economy picked up a little momentum in December, closing off the year with the fastest growth recorded since July.

Commenting on the data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence said:

“Looser financial conditions have helped boost demand, business activity and employment in the service sector, and have also helped lift future output expectations higher.

However, the increased cost of living and cautious approach to spending by households and businesses means the overall rate of service sector growth remains far short of that witnessed during the travel and leisure revival back in the spring and summer.

“Manufacturing meanwhile remains a drag on the economy, with an increased rate of order book decline prompting factories to reduce production, cut back on headcounts and scale back their input buying.

Despite the December upturn, the survey therefore signals only weak GDP growth in the fourth quarter.

The survey’s selling price gauge, which tends to lead changes in consumer price inflation, remains sticky but at a level which is indicative of CPI running only modestly above 2%.

“Service sector input cost inflation, a key gauge of core inflation, once again remained notably elevated by historical standards, though even here the average rate of increase in the fourth quarter has been the lowest since mid-2020.”

Is that really a picture that paints the need for six rate-cuts next year?