Expansion in the U.S. manufacturing sector slighly gathered pace in June on a slowdown in production, exports, supplier deliveries and prices of raw materials. The Purchasing Managers Index (PMI), which takes into account expectations for future production, new orders, inventories, supplier deliveries and employment, dropped 1 percent to 54.3 percent in June from 54.5 percent in the previous month. The reading also trails expectations as economists polled by Bloomberg News had called for a print of 54.9. The annualized PMI for March corresponded to 4.0 percent increase in real gross domestic product (GDP) annually.
The ISM Manufacturing Index has stayed above 50-level for thirteen consecutive month, indicating sustainable expansion in the manufacturing sector of the world’s largest economy. New orders accelerated with the sub-index jumping 2 percent to 58.9 percent, a six-month high, thanks to growth in orders in twelve industries, led by nonmetallic mineral products, wood products, furnitures, food and beverage. In contrast, June’s production grew at a slower rate with the Production Index declining 1 percent to 60 percent from 61 in May. The employment gauge was unchanged at 52.8 percent last month, falling short of the concensus estimate of 53.2 percent. Besides, Inventories Index remained at 50 percent, the same level of growth as reported in May.
ISM Prices Index, which reflects business sentiment regarding future inflation, came in at 58 percent in June, below a consensus estimate of 60 percent. The print is 2 percentage points lower than the 60 percent registered in May. However, pressures on prices of raw materials were reportedly elevated in eleven of eighteen manufacturing industries including furnitures, paper, petroleum, coal, and fabricated metal products.
GPBUSD 1-minute Chart: July 1, 2014
U.S. dollar slightly weakened versus most of its major trading partners after the ISM report showed less-than-expected growth in the U.S manufacturing sector. The greenback extended lossed against the British pound in minutes following the ISM report. The pound was traded at $1.7160, a new record high in five year, at 14:01 GMT in London. However, the GPBUSD pair swings with the pound falling 30 pips to $1.7133 and then resuming gain to $1.7144. At the time this report was written, the pound was traded at $1.7142. The significant appreciation in sterling was triggered in June 16 when Bank of England Gov. Mark Carney signaled that the first rate hike in the U.K. could come sooner than markets expect, thereby increasing the gap in interest rates between the pound and the US dollar.
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