ISM Non-Manufacturing PMI 51.4... In Line with Expectations
Some Easing of Recession Fears... US Treasury Yields Rise
Last month, the U.S. service sector economy matched market expectations and shifted to an expansion phase after one month. Following the Asian stock markets the previous day, the recession fears that hit the U.S. market on the same day were partially alleviated, reducing the losses on the New York Stock Exchange. Treasury yields also turned upward.
On the 5th (local time), the U.S. Institute for Supply Management (ISM) announced that the July Non-Manufacturing PMI was 51.4, in line with the forecast (51.4). Compared to the previous month (48.8), which was the lowest level in about four years, it rose by 2.6 points, switching to an expansion phase after one month.
A PMI figure below 50 indicates economic contraction, while above 50 indicates expansion. Service employment, new orders, and business activity rebounded, rising above 50.
Among the sub-indices, the employment index was 51.1, exceeding both the forecast (46.4) and the previous month’s figure (46.1). New orders were 52.4, also surpassing the market expectation (49.8) and the previous month (47.3). Business activity was 54.5, exceeding the previous month’s figure (49.6).
With the U.S. service sector economy shifting to expansion, concerns stemming from the July employment report shock and manufacturing sector slowdown released last week were partially eased. According to the July employment report released by the U.S. Department of Labor on the 2nd, nonfarm payrolls increased by 114,000, and the unemployment rate was 4.3%. The employment increase was significantly below the forecast (176,000), and the unemployment rate rose rapidly beyond expectations (4.1%), spreading fears of a U.S. economic recession.
Stephen Brown, Chief North America Economist at Capital Economics, analyzed, "Ultimately, the rebound in the July ISM services index shows that the economy or labor market is hardly falling off a cliff, as many feared."
Accordingly, the New York Stock Exchange has reduced its losses after the July services PMI announcement. As of 11:19 a.m. at the New York Stock Exchange (NYSE) on the same day, the Dow Jones Industrial Average was down 2.36% compared to the previous day. The S&P 500 and Nasdaq indices were down 2.47% and 2.68%, respectively, with the decline narrowing compared to earlier in the session.
U.S. Treasury yields also turned upward. The U.S. 2-year Treasury yield, sensitive to monetary policy, is currently trading at 3.88%, up 1 basis point (1bp = 0.01 percentage points) from the previous trading day, and the U.S. 10-year Treasury yield, a global bond yield benchmark, is trading slightly higher at around 3.79% compared to the previous day.
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