US manufacturing has expanded for a sixth consecutive month in June, according to the latest data, suggesting an easing of inflation fears. The S&P Global US Manufacturing PMI rose to 55.7, surpassing forecasts and marking the highest level since May 2022. Despite this growth, inflation figures remain a concern, with the CPI at 4.2% in May, double the Federal Reserve’s target. Markets appear to interpret the manufacturing data as a potential indicator of a shift in inflation dynamics, possibly affecting expectations for the upcoming June CPI report.

Key Takeaways

• Market activity suggests participants view the manufacturing expansion as supportive of a scenario where inflation fears are easing.
• The June PMI’s growth, coupled with easing inflation fears, appears to correlate with increased confidence in lower inflation outcomes.
• Despite the positive manufacturing data, overall inflation remains elevated, suggesting continued caution in market expectations.

What to Watch

The upcoming release of the June CPI report by the Bureau of Labor Statistics on July 14 will be a key indicator for inflation expectations. Any significant change in energy prices or core inflation components could affect market expectations. Observers will be watching for any Federal Reserve commentary or adjustments in economic forecasts that could influence inflation outlooks.

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