Breaking: US S&P Manufacturing PMI declines to 49.9, Composite PMI falls to 50.9

US S&P Global Composite PMI declined to 50.9 in April's flash estimate from 52.1, showing that the business activity in the US' private sector continued to expand, albeit at a softer pace than in March.

S&P Global Manufacturing PMI dropped to 49.9 from 51.9 in the same period, highlighting a contraction in the manufacturing sector's business activity. Finally, S&P Global Services PMI edged lower to 50.9 from 51.7.

Assessing the survey's findings, "the US economic upturn lost momentum at the start of the second quarter, with the flash PMI survey respondents reporting below-trend business activity growth in April,"  said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

"Further pace may be lost in the coming months, as April saw inflows of new business fall for the first time in six months and firms’ future output expectations slipped to a five-month low amid heightened concern about the outlook," Williamson added.

Market reaction

The US Dollar came under selling pressure with the immediate reaction. At the time of press, the US Dollar Index was down 0.33% on the day at 105.80.

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This section below was published at 08:00 GMT as a preview of the US S&P Global PMI data.

• S&P Global PMIs are expected to indicate business activity in the US continued to expand in April.
• Manufacturing and Services output are seen advancing at a moderate pace. 
• EUR/USD holds above 1.0600, near-term bearish bias remains intact. 

S&P Global will release the flash estimates of the United States (US) Purchasing Managers Indexes (PMIs) for April on Tuesday, a survey that measures business activity throughout the month. The report is divided into services and manufacturing output and compiled in a final figure, the Composite PMI. 

The economic activity in the US private sector expanded at a moderating pace in March, with the S&P Global Composite PMI edging lower to 52.1 from 52.5 in February. The Services PMI declined to 51.7 from 52.3 in this period, while the Manufacturing PMI fell to 51.9 from 52.2.
Commenting on the survey's findings, “further expansions of both manufacturing and service sector output in March helped close off the US economy’s strongest quarter since the second quarter of last year," said Chris Williamson, Chief Business Economist at S&P Global Market Intelligence.

"The survey data point to another quarter of robust GDP growth accompanied by sustained hiring as companies continue to report new order growth," Williamson added. “A steepening rise in costs, combined with strengthened pricing power amid the recent upturn in demand, meant inflationary pressures gathered pace again in March." 

What to expect from the next S&P Global PMI report?

S&P Global Manufacturing PMI and Services PMI are both expected to come in at 52 in April’s flash estimate, highlighting an ongoing expansion in the private sector’s economic activity. Any reading above 50 signals economic activity is growing, while an indicator below this threshold suggests contraction.

Since the beginning of the year, the two main highlights of the US economy have been robust activity and stubborn inflation. Hence, market participants have shifted their expectations toward an extended delay in the Federal Reserve’s (Fed) policy pivot towards rate cuts. Earlier in the year, investors were forecasting the Fed to lower the policy rate as early as March. Employment, activity and inflation data in the first quarter of 2024 largely surprised to the upside and caused investors to reassess the US central bank’s policy outlook. According to the CME FedWatch Tool, markets currently price in a 65% probability that the Fed will lower the policy rate in September.

Flash PMI data for April are expected to confirm that the US economy preserved its strength to start the second quarter. Comments regarding the input costs could also point to ongoing inflationary pressures.

When will April flash US S&P Global PMIs be released and how could they affect EUR/USD?

The S&P Global PMI report will be released on Tuesday at 13:45 GMT. Ahead of the event, the US Dollar (USD) stays resilient against its rivals. The USD Index (DXY), which tracks the USD’s performance against a basket of six major currencies, seems to have entered into a consolidation phase after setting a five-month high above 106.00 in the previous week, boosted by hawkish Fed commentary and risk aversion.

Unless either the Manufacturing or the Services PMI unexpectedly drops below 50 and shows a contraction in the sector’s activity, the USD could hold its ground. If the publication highlights a downturn in private sector’s employment, or a softening in input costs, the USD could come under selling pressure even if headline PMIs hold above 50.

Eren Sengezer, European Session Lead Analyst at FXStreet, shares a brief outlook for EUR/USD:

“The Relative Strength Index (RSI) indicator on the daily chart stays below 40, suggesting that EUR/USD has more room on the downside before it turns technically oversold.”

“On the upside, 1.0700 (static level) aligns as interim resistance before 1.0750, where the 20-day Simple Moving Average (SMA) is located. A daily close above this level could attract technical buyers and open the door for an extended recovery toward the 200-day SMA at 1.0820. On the other hand, supports are located at 1.0600 (static level), 1.0500 (psychological level, static level) and 1.0450 (October 3 low).”