US services PMI disappoints, but consumer confidence climbs as Fed meets over interest rates

Billy Bambrough
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July Retail Numbers Weaker Than Expected
The US economy is under pressure to perform in the next few months, following the Fed raising interest rates in December last year (Source: Getty)

The latest US services purchasing managers index (PMI) has come in below expectations, further adding to the challenge faced by the US Federal Open Market Committee (FOMC), who are deciding on whether to change the benchmark interest rate over the next 18 hours.

Markit's flash services PMI came in a bit below expectations for January, at 53.7. Economists had expected an index reading of 54, according to Bloomberg.

A PMI reading above 50 indicates expansion indicates expansion in the sector, whereas anything below 50 signals contraction.

Chris Williamson, chief economist at Markit said:

“The survey data paint an inauspicious start to the year for the US economy. A struggling manufacturing economy is being accompanied by a services sector where growth showed further signs of losing momentum in January even before the bad weather hit. The data are by no means disastrous, signalling a 1.5% annualised rate of economic growth at the start of the year, but the drop in business confidence to one of its lowest levels for over five years suggests that firms are bracing themselves for worse to come. Worries about financial market volatility, the impact of slower growth overseas, a downturn in the energy sector and uncertainty about higher interest rates all took their toll and set the scene for further weakness in coming months.

The index came in at 53.9 in December.

However, consumer confidence in the US has climbed to a three-month high in January, according a survey from the Conference Boar, at 98.1 from 96.3 in December.

The index was expected to be unchanged, though the latest data has been welcomed by markets.

Connor Campbell, analyst at Spreadex said: “It was the kind of open that refreshed the entire market landscape, allowing Europe to creep into the green for the first time since the first few moments of trading on Monday morning.”

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