Inventory building and price commentary stood out in PMI/Bowman joins Waller in getting dovish

The June S&P Global US PMI composite index fell a touch m/o/m to 52.8 from 53. The manufacturing component held at 52 while services slipped to 53.1 from 53.7. I’ll say again, for some reason their services component does not include the key areas of retail/wholesale trade and construction.

The manufacturing index holding above 50 can be attributed mostly to the inventory restocking going on in response to tariff policy. S&P Global said “June saw further inventory building in manufacturing. Purchasing of inputs was expanded at the fastest rate in 37 months, causing inventories of inputs to also rise again, increasing at the 2^nd fastest rate in over three years following May’s survey record rise. Inventories of finished goods at factories meanwhile registered the largest rise for nine months; a rise that was among the greatest in the survey’s 18 year history.” A gain in employment also helped this component.

New orders for both manufacturers and service providers dipped a touch from May and S&P Global said gains were still seen, “driven by rising domestic demand” as “This serviced to mask a fall in export orders in June.” I’m guessing in part due to reduced travel, “Services exports have suffered the largest quarterly contraction since late 2022 in the three months to June.”

What also stood out in the report was the commentary on inflation/pricing with the biggest influence not surprisingly being tariffs. “Price pressures rose sharply across both manufacturing and service sectors during June, the former reporting an especially steep increase, and again commonly linked to tariffs.” On the manufacturing side, “input prices and selling prices both rose at rates not seen since July 2022, as higher costs were passed on to customers. Close to two-thirds of all manufacturers reporting higher input costs attributed these to tariffs, whilst just over half of respondents linked increased selling prices to tariffs.”