US Composite PMI Jumps to Reported 58.4 in Strongest Reading in Five Years

The US Composite Purchasing Managers' Index released this week revealed a reported reading of 58.4, widely beating expectations and registering its highest level in five years, in a sign that US economic activity is gaining upward momentum in both the services and manufacturing sectors.

The service sector reading was the strongest within the composite index as reported, driven by rising consumer demand and employment growth, while the manufacturing sector recorded a notable increase for the first time in months, prompting analysts to revise their quarterly growth forecasts upward.

On the monetary policy front, this reading contributed to raising the probability of a Federal Reserve interest rate hike at the upcoming October meeting to above 60% as reported, adding extra pressure on bond markets and pushing the 10-year yield to its highest levels since 2007.

A reading above 50 for the index indicates economic expansion, while a reading of 58.4 reflects an exceptionally strong pace of expansion that keeps the Federal Reserve in monetary tightening mode, far from any expectations of easing in the foreseeable future.

What does the PMI mean?

The Purchasing Managers' Index (PMI) is a monthly survey that evaluates business activity. Any reading above 50 indicates economic expansion, and any reading below 50 indicates contraction. 58.4 indicates very strong expansion, closest to periods of accelerating economic recovery.