· Event impact
US ISM Manufacturing PMI Rises in May, with Prices Paid Component Also Increasing
Transmission path
Stronger manufacturing activity combined with rising price pressures adds to evidence of persistent inflation, potentially influencing the Federal Reserve's policy stance towards a more hawkish bias and pushing bond yields higher.
Market mechanism
Stronger manufacturing activity combined with rising price pressures adds to evidence of persistent inflation, potentially influencing the Federal Reserve's policy stance towards a more hawkish bias and pushing bond yields higher.
Extended read
The Institute for Supply Management (ISM) released its May Manufacturing PMI, which showed a pickup in activity to 53.3 from 52.7. This indicates that the manufacturing sector, after a period of softness, may be regaining momentum. The reading was corroborated by the S&P Global PMI, which also showed an increase. More concerning for markets, however, was the Prices Paid component of the ISM survey, which climbed to a high level of 85.3. This suggests that input cost pressures for manufacturers remain intense and are still rising. This data point, combined with the recent uptick in PCE inflation, complicates the narrative of disinflation and may force the Federal Reserve to maintain its restrictive policy stance, impacting rate-sensitive assets.
Exposed assets
DGS10 · DXY · QQQ
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