S&P Global US services PMI 49.2 vs. 45.0 expected


  • Before was 43.7
  • Manufacturing 51.8 vs. 51.1 expected
  • Previous manufacture 51.5
  • Compound 49.3 versus 44.6 before

Is this a situation where good news is bad news? The Fed wants to see demand slump and there has been a rebound in services…

Price Comments:

Reflecting more moderate increases in cost charges, companies increased their selling prices at a slower pace at the end of the third quarter. That said, the moderation was led by service providers, with manufacturers seeing a steeper rise in production costs in an effort to pass on rising costs to customers.

Commenting on the PMI flash data, Chris Williamson, chief economist at S&P Global Market Intelligence, said:

“US businesses report a third straight monthly drop in output in September, closing the weakest quarter for the economy since the global financial crisis if the pandemic lockdowns of early 2020 are excluded. However, while production fell in both manufacturing and services in September, in both cases the rate of contraction moderated compared to August, notably in services, as order books returned to modest growth, allaying some concerns about the depth of the current slowdown.

“There was also better news on inflation, with supplier shortages at the lowest since October 2020, helping to ease some of the pressure on commodity prices. These improved supply chains, along with a marked slowdown in demand since the start of the year, have contributed to cooling the overall rate of inflation of business costs and average selling prices of goods and services to their lowest level since the start of 2021.

Inflation

Inflation

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.

Inflation is defined as a quantitative measure of the rate at which the average price level of goods and services in an economy or country increases over a period of time. It is the rise in the general price level where a given currency is effectively buying less than it has in previous periods. In terms of valuation of strength or currencies, and by extension foreign currencies, inflation or its measures are extremely influential. Inflation stems from the global creation of money. This money is measured by the level of the total money supply of a specific currency, for example the US dollar, which is constantly increasing. However, an increase in the money supply does not necessarily mean that there is inflation. What leads to inflation is a faster increase in the money supply relative to the wealth produced (measured with GDP). This thus generates demand pressure on a supply that is not increasing at the same rate. The consumer price index then increases, generating inflation. How Does Inflation Affect Forex? The level of inflation has a direct impact on the exchange rate between two currencies on several levels. This includes purchasing power parity, which attempts to compare the different purchasing power of each country based on the general level of prices. By doing so, it helps to determine the country with the most expensive cost of living. The currency with the higher inflation rate consequently loses value and depreciates, while the currency with the lower inflation rate appreciates in the forex market. Interest rates are also impacted. Inflation rates that are too high push interest rates up, which has the effect of depreciating the currency on the exchange. Conversely, too low inflation (or deflation) pushes interest rates down, which has the effect of appreciating the currency on the foreign exchange market.
Read this term Nevertheless, pressures remain elevated by historical standards and, with business activity declining, surveys continue to paint a broad picture of a struggling economy in a stagflationary environment.”


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