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Non-manufacturing PMI data is almost stagnant! Gold rose $14 in the short term

Non-manufacturing PMI data is almost stagnant! Gold rose $14 in the short term

Non-manufacturing PMI data is almost stagnant! Gold rose $14 in the short term
Non-manufacturing PMI data is almost stagnant! Gold rose $14 in the short term

The Fed "happy" good news? Inflation in the service sector has cooled, and even the employment index in the service sector is showing "good signs"...

The U.S. services sector nearly stagnated in May as business activity and orders slowed, while a measure of the price paid fell to a three-year low.

Data released on Monday showed that the US ISM non-manufacturing PMI fell to 50.3 in May from 51.9 in April, the lowest level so far this year. 

Non-manufacturing PMI data is almost stagnant! Gold rose $14 in the short term

After the data was released, spot gold short-term gains extended to $14 at one point, the dollar index fell nearly 30 points in the short term, U.S. Treasury yields fell, the dollar fell, and traders reduced their bets on the Fed's rate hike next week.

COMEX's most active gold futures contract traded 2,038 lots in one minute at 22:02 Beijing time on June 5, with a total value of $399 million;

COMEX's most active gold futures contract traded 3,655 lots in one minute at 22:03 Beijing time on June 5, with a total value of $717 million.

Non-manufacturing PMI data is almost stagnant! Gold rose $14 in the short term

The index of business activity, which corresponds to the ISM Factory Output Index, fell for the fourth straight month to a three-year low of 51.5. Combined with a decrease in orders, this decline indicates that service providers are experiencing sluggish demand. 

The index of new orders in the services sector fell to 52.9 in May from 56.1 in April. As demand cooled, services inflation also slowed, which is good news for Fed officials trying to cut inflation to their 2 percent target.

Services remain at the center of the fight against inflation, as prices tend to be more sticky and less responsive to rate hikes. Anthony Nieves, chair of the ISM Services Investigative Committee, said in a statement:

"The majority of respondents said the business environment is stable for now, although there are also concerns about an economic slowdown."

Eleven sectors reported growth last month, with accommodation and foodservice leading the way and seven showing declines.

Weaker demand against the backdrop of rising interest rates and tighter credit conditions has also helped reduce inflationary pressures. The ISM input price index fell to 56.2 in May, which is now closer to pre-Covid levels. 

This comes after ISM's manufacturing survey showed the U.S. had its longest contraction since 2009. A surge in inventories in the service sector, as well as signs from suppliers saying they were overstocked, signaled further weakness in factory output.

The ISM index, which measures inventories in the services sector, rose to a more than two-year high, while another measure of confidence in inventory levels surged to its highest level since April 2020. 

Meanwhile, the ISM services employment index fell to 49.2, the lowest since October. While the indicator hinted at a slowdown in employment, government data released last week showed a higher-than-expected increase in employment in May.