Skip to content

CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved. CFDs are leveraged products. CFD trading may not be suitable for everyone and can result in losses that exceed your deposits, so please ensure that you fully understand the risks involved.

US flash PMI cools in May, S&P 500 extends losses as economic growth slows

US PMI Composite Output Index slows to 53.8 in May from 56 in April, hitting a four-month low; manufacturing sector growth eases to 57.5 from 59.2 and S&P 500 extends losses.

U.S. economic activity continued to cool in the second quarter, dampened by soaring price pressures, softening demand and deterioration in supplier delivery times. According to S&P Global, its Flash Composite Purchasing Managers’ Index, which combines manufacturing and services production data, fell to a preliminary reading of 53.8 in May from 56.0 last month, hitting its lowest mark since the start of the year when the omicron variant brought the recovery to a screeching halt. For general interpretation, any figure above 50 signals expansion while readings below that level indicate contraction.

Examining the results in more detail, the services PMI fell to 53.5 from 55.6 in April, disappointing expectations that had called for a more modest pullback to 55.2. Although demand conditions remained sturdy thanks to loosened pandemic restrictions, growth in the sector where most Americans work continued to moderate as a result of concerns over higher interest rates and consumers' reduced willingness to spend due to falling real incomes. Despite this deceleration, optimism among service sector firms increased on hopes that labor and supply shortages will ease and the retrenchment in customer demand will prove transitory.

Elsewhere, the May manufacturing PMI retreated to 57.5 from 59.2, in line with consensus expectations. It is true that the slowdown raises concerns, but the pace of growth remained solid on account of a steep rise in production and new orders, and afaster upturn in employment. Overall, the goods-producing sector, which accounts for roughly 12% of GDP, maintained a steady expansion, but confidence dropped to a seventh month low amid a significant increase in cost burdens.

May PMI data

Source: DailyFX

In summary, May PMIs suggest that U.S. economic activity is losing strength, but are still indicative of annualized GDP growth of approximately 2%, a sign that the economy is not about to go off the cliff as many Wall Street analysts predict. Healthy output expansion, solid employment numbers and unrelenting cost pressures for U.S. businesses suggest that the Federal Reserve will have to continue to removing policy accommodation over the coming months to meet its mandate. This may be problematic for risk assets, especially if GDP decelerates more than anticipated.

Immediately after the PMI survey crossed the wires, the S&P 500 extended session's losses, dropping more than 2% on the day. While the sharp sell-off is partly related to weakness in the technology sector triggered by Snap's poor outlook, the rapid slowdown in economic growth is also contributing to the negative sentiment.

S&P 500 five-minute chart

Source: TradingView

This information has been prepared by DailyFX, the partner site of IG offering leading forex news and analysis. This information Advice given in this article is general in nature and is not intended to influence any person’s decisions about investing or financial products.

The material on this page does not contain a record of IG’s trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk.

IGA, may distribute information/research produced by its respective foreign affiliates within the IG Group of companies pursuant to an arrangement under Regulation 32C of the Financial Advisers Regulations. Where the research is distributed in Singapore to a person who is not an Accredited Investor, Expert Investor or an Institutional Investor, IGA accepts legal responsibility for the contents of the report to such persons only to the extent required by law. Singapore recipients should contact IGA at 6390 5118 for matters arising from, or in connection with the information distributed.

The information/research herein is prepared by IG Asia Pte Ltd (IGA) and its foreign affiliated companies (collectively known as the IG Group) and is intended for general circulation only. It does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. You should take into account your specific investment objectives, financial situation, and particular needs before making a commitment to trade, including seeking advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit.

No representation or warranty is given as to the accuracy or completeness of this information. Consequently, any person acting on it does so entirely at their own risk. Please see important Research Disclaimer.

Please also note that the information does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. Any views and opinions expressed may be changed without an update.

Take a position on indices

Deal on the world’s major stock indices today.

  • Trade the lowest Wall Street spreads on the market
  • 1-point spread on the FTSE 100 and Germany 40
  • The only provider to offer 24-hour pricing

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 15 mins.

Prices above are subject to our website terms and agreements. Prices are indicative only. All shares prices are delayed by at least 20 mins.

The Momentum Report

Get the week’s momentum report sent directly to your inbox every Tuesday for FREE. The Week Ahead gives you a full calendar of upcoming key events to monitor in the coming week, as well as commentary and insight from our expert analysts on the major indices to watch.

For more info on how we might use your data, see our privacy notice and access policy and privacy webpage.

You might be interested in…

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.