Gap between service and manufacturing sector widening
July 7, 2023 9:22 amVideo
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According to the Institute for Supply Management (ISM), the index rose by 3.6 points, the highest since the beginning of the year, reaching 53.9 points. Values above 50 indicate growth in activity, while values below 50 indicate contraction. The data and the index exceeded all economists’ forecasts in the survey.
The survey also shows that the majority of respondents indicate stable business conditions; however, they remain cautious about inflation and future economic prospects. The Chair of the ISM Services Business Survey Committee noted that fifteen service sectors reported growth in the past month. Specifically, accommodation and food services, entertainment and recreation, and real estate rental services experienced the highest growth.
Undoubtedly, the current figures indicate a healthy and sustainable demand for services, as Americans prefer to spend money on experiences while limiting their purchases of goods. This trend helps explain the growing gap between the two ISM surveys. In a recent survey, the ISM Manufacturing Index demonstrated contraction, leading to an even greater divergence from the 50-point level.
Considering that manufacturing activity contracted at the fastest pace in over three years, the services index is currently almost 8 points higher than the manufacturing index, marking the largest gap since August 2015.
The report also states that the employment index in the ISM services sector reached a four-month high of 53.1, indicating that service providers are increasing wages after a previous decline. The survey also suggests that despite stable business conditions, many are preparing for a challenging third quarter. Inflationary pressure, labor issues, and limited credit opportunities continue to create financial problems for businesses and companies.
The ISM supplier inventories index increased at a more moderate pace after a surge in the previous month. The sentiment indicator regarding inventory levels also decreased but remained at a relatively high level.
As for the EUR/USD pair, bulls need to settle the price above 1.0900 to take control of the market. This would allow the pair to move towards 1.0930. From that level, a further climb to 1.0975 is possible, but without new positive data on the eurozone, it would be quite challenging. In the case of a decline in the trading instrument, major buyers may act near 1.0870. If there is no significant activity there, it would be better to wait for a retest of the low of 1.0840 or consider opening long positions from 1.0800.
As for the GBP/USD pair, demand for the pound remains quite strong, indicating the continuation of a bullish market. A rise in the pair can be expected after gaining control above 1.2760 since breaking through this range will strengthen hopes for a further recovery toward 1.2800. Afterward, we can consider a more significant surge toward 1.2835. In the case of a decline in the pair, bears will attempt to gain control below 1.2720. If successful, breaking this range will hit bullish positions and push the pair toward the low of 1.2675 and 1.2620.
The material has been provided by InstaForex Company – www.instaforex.com