Services Activity Beats Forecasts as Manufacturing Falls Short, Splitting the Economic Picture

Two purchasing managers' index reports released this week told different stories about the U.S. economy. The services PMI, which tracks activity at companies like banks, retailers and healthcare providers, surged beating forecasts and the previous month's level. The manufacturing PMI, covering factories and industrial producers, fell short of expectations and signaled slower growth. A PMI reading is a survey-based gauge of whether business activity is expanding or contracting; above 50 generally means growth. The divergence between a strong services sector and a weakening factory sector is a familiar pattern in this expansion, since services make up the larger share of U.S. output, but the split makes it harder for investors to read overall economic momentum from either number in isolation. What remains unresolved is whether the manufacturing miss is the start of a trend or a one-off dip, and whether services strength can offset it in aggregate growth data going forward.