LIVE MARKETS-TGIF data: Flash PMI, UMich

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TGIF DATA: FLASH PMI, UMICH

Investors were served two economic reports to chew on at the end of a relatively sparse data week.

Diving right in, business activity in the United States has continued to expand this month, but at a slightly slower pace than in September.

S&P Global's advance "Flash" October purchasing managers' indexes (PMIs) showed the manufacturing side USMPMP=ECI eking out an unexpected (albeit minuscule) 0.1-point gain to print at an even 56.

But the larger services sector USMPSP=ECI erased the mild acceleration in factory activity by shedding 0.9 points to a still-robust 57.9, just a hair south of consensus.

Taken together, the composite measure USPMCF=ECI lost momentum, easing to 57.6 from 58.4, which marked its fastest pace in four years.

All metrics are comfortably above 50, the PMI dividing line between contraction and expansion.

Under the surface, new orders hit their highest level in 4-1/2 years, backlogs increased sharply and employment rose at its fastest pace since June 2022.

On the other hand, future expectations cooled and the "selling prices" component jumped to its highest level since November 2022, reminding market observers — as if they needed reminding — that heightened inflation is still a thing.

"If the reopening of the economy after COVID is excluded, recent months have seen the best growth spell for US businesses since early 2015," writes Chris Williamson, S&P Global's chief business economist. "However, cost pressures remain a key concern, notably as the renewed surge in oil prices reverberates through to impact a wide variety of goods and services."

"Supply chain bottlenecks have meanwhile intensified, and order book backlogs are growing, making it easier for companies to pass higher costs on to customers," Williamson adds. "The result is the sharpest increase in selling prices for over four years to a pace that indicates consumer price inflation is likely to rise further above the Fed’s target in the coming months."

Moving on, the University of Michigan's (UMich) second and final stab at October consumer sentiment USUMSF=ECI showed the mood among consumers is a bit less downbeat than originally reported.

The index came in at a tidy 48.0, a 1.7-point improvement over the initial reading, just 0.1 point south of the final September print.

Survey participants' aggregate assessment of present conditions was revised 4.5% higher to 46.7, while the expectations metric was boosted by 3.2% to 48.8.

But compared with September's final reading, current conditions deteriorated by 8.3%, while expectations managed to improve by 5.4%.

"This month’s decline in the Current Conditions subindex was driven entirely by buying conditions for durables, which plunged 18% on the basis of higher interest rates and rising concerns about the affordability of such purchases," writes Joanne Hsu, UMich's director of consumer surveys. "Purchasing power continues to dominate consumer views of the economy. Sentiment is now 10% below a year ago and 15% less than February, just prior to the Iran conflict."

The graphic below shows consumer expectations currently sit 29.7% below the initial pandemic-related shutdown shock.

The inflation expectations element was unchanged from the initial take: respondents expect annual price growth of 4.7% a year from now. That's hotter than UMich's final 4.6% take for September, and 2.1 percentage points north of the most recent core CPI reading.

Longer term, consumers expect annual inflation of 3.5% five years from now, up from 3.3% a month prior.

The graphic below shows 12-month inflation expectations shifted forward a year, mapped against core CPI. It illustrates that consumer surveys aren't reliable predictors of future inflation.

September core CPI landed at 2.6%. In September 2025, UMich survey participants expected 12-month forward inflation would be 4.7%.

(Stephen Culp)

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