Market Wrap – Strong US Data

Market expectations of a coming US rate hike or series of rate hike increased dramatically after the United States economy posted much stronger than expected data.

In response the US dollar rose broadly against a basket of top currencies and stocks sold of heavily as traders started to price in the possibility of 3 more rate hikes in 2023.

Breaking down the data, the ISM Services PMI unexpectedly jumped to 53.9 in June of 2023, pointing to the strongest growth in the services sector in four months, and well above 50.3 in May and forecasts of 51.

Production (59.2 vs 51.5) and new orders (55.5 vs 52.9) rose much faster while employment rebounded (53.1 vs 49.2) and price pressures eased (54.1 vs 56.2).

Also, the supplier deliveries index improved and registered 47.6 percent, 0.1 percentage point lower than in May and inventories rose for a second month (55.9 vs 58.3).

Anthony Nieves, Chair of the ISM Services Business Survey Committee said, “the majority of respondents indicate that business conditions remain stable; however, they are cautious relative to inflation and the future economic outlook”.

The number of job vacancies in the United States fell by 496 thousand from the previous month to 9.824 million in May of 2023, slightly below market expectations of 9.935 million.

While easing below the 10 million threshold, the openings remained sharply above levels prior to the pandemic, backing evidence of a tight labour market and adding leeway for the Federal Reserve to extend its fight against inflation and continue raising interest rates.

The biggest declines were noted in health care and social assistance (-285 thousand), finance and insurance (-139 thousand), and other services (-78 thousand).

On the other hand, job openings increased in educational services (+45 thousand), state and local government education (+37 thousand), and in the federal government (+24 thousand). Openings were lower across all regions, namely in the West (-173 thousand) and the Northeast (-156 thousand).