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Weaker Demand > Softer Inflation Remains A Crucial Key PMI Theme

US DATA
The Fed will be encouraged that the crucial theme of weakening demand in the economy - leading to more modest inflation - played out further in November's prelim US PMIs.
  • The activity data overall remain contractionary, and are deteriorating: Composite at 44.6, a 4-month low), Services at 44.4 (4-month low), and Manufacturing at 47.4. (a 31-month low).
  • Demand is weakening, as evidenced by the fastest decline in new orders since May 2020 with the S&P Global release noting "pressure on purchasing power among customers and company balance sheets" - "Weak demand conditions were broad-based, though manufacturing firms saw a steeper decrease in new orders compared to their service sector counterparts".
  • On the back of weaker demand for new orders, hiring "remained subdued" in December. Backlogs fell for the third straight month, in part due to supply chain bottlenecks easing for manufacturers.
  • Input prices continue to wane - slowest pace since Oct 2020 and in line with the long-run average. Again, weaker demand for inputs cited as the reason for dampened price increases.
  • And also demand-related, the rate of selling price inflation eased to the slowest in two years as firms recorded only modest price increases "in an effort to drive sales and pass through any [input] cost savings".
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