The Day at a Glance | May 23 2023

*PMI´s in the Eurozone logged divergence among sectors during May. 

*The composite PMI in the US reached a thirteen month high in May; but similar to what is seen in the Eurozone, the gap between sectors widened. 

*Secretary of the Treasury, Janet Yellen, reminded US Congress on Monday about the limited time they have before the Treasury can no longer pay all government obligations. Therefore, negotiations on the debt ceiling will continue on Tuesday. 

Economic environment

The Eurozone´s manufacturing PMI dragged the composite index to its lowest reading in three months. According to May PMI data, business activity in the Eurozone continued to expand during May, as indicated by the composite index, which set at 53.3 units. Despite this being the lowest reading in three months, it was the third highest figure in the last twelve months, which suggests there is a solid pace of economic growth in the second quarter of 2023. However, there is an increasingly noticeable divergence between sectors, which points towards an uneven recovery. The services sector has been driving growth and logged a 55.9 point figure, the second highest in the last year – second only to the 12-month high observed in April (56.2). On the other hand, manufacturing production receded more than expected and recorded a 44.6 point figure, its lowest reading in three years. With this, the gap between both sectors widened to its highest level since January of 2009. 

The US composite PMI logged a 13 month high and set at 54.5. May´s progress came exclusively from the services sector, which widely exceeded the consensus estimates of 52.6 by setting at 55.1 points. However, the manufacturing PMI returned to contractionary territory and recorded a 48.5 point figure, its lowest level in three months. Furthermore, it was emphasized that both sectors continue to hire new employees, given the need to meet demand in the services sector, while in manufacturing, it was mainly due to the improvement in candidate availability, increasing companies´ capacity to process pending jobs and reducing production delays. With this, the recent acceleration in employment – particularly on the services front – could imply new inflationary pressures.