US PMI, inflation volatility apparent/Home sales

Treasury yields are at the high of the morning after the S&P Global composite PMI for May was better than expected mostly driven by a jump in services to 54.8 from 51.3. Manufacturing helped too as it rose to 50.9 from 50. With services, keep in mind that S&P Global DOES NOT include retail for some reason while ISM does so the mixed picture we’re seeing with retailers, certainly seen with earnings, is not reflected here.

With services, new orders picked up “having slipped into decline in April” and “registering one of the strongest gains seen over the past year, though demand was again subdued by a further fall in services exports.” Something to watch, employment fell for a 2^nd month. On pricing, and make sure to read below, “Service sector costs rose at an increased rate, reflecting higher staffing costs in particular.”

On manufacturing, “Both output and employment made increasingly positive contributions to the PMI compared to April, while the drags from new orders and stocks of purchase components moderated.” Employment though was still below 50. Price pressures picked up. “Input prices continued to rise sharply in May, the rate of inflation accelerating to register the 2^nd largest monthly increase seen over the past 8 months. Manufacturers reported an especially steep increase, suffering the largest cost rise for 1 ½ years amid reports of higher supplier prices for a wide variety of inputs, including metals, chemicals, plastics, and timber based products, as well as higher energy and labor costs.”