S&P Global's latest data reveals a downturn in U.S. economic activity, with the flash U.S. purchasing managers' index (PMI) for February falling to 50.4, its lowest reading since September 2023. This drop marks a decrease of 2.3 points from January's figures. The decline in the PMI, especially within the services sector, has reignited discussions about potential Federal Reserve rate cuts.
The services PMI business activity index recorded a concerning slide to 49.7, falling below the critical boom-or-bust threshold of 50 for the first time in over two years. This figure also fell short of the Dow Jones market forecast, which had anticipated a healthier reading of 52.8. Market analysts view this downturn as a significant indicator of waning economic momentum in the services sector.
In response to the weaker-than-expected U.S. economic data, the yen temporarily appreciated to 148.93 against the dollar in New York trading on Friday. This appreciation marks the yen's strongest position since early December. Notably, on February 21, the yen strengthened beyond 149 against the dollar, a level it had not reached in two and a half months.
The drop in PMI figures has led to heightened speculation that the Federal Reserve might consider cutting interest rates to stimulate economic growth. The recent PMI data reflects an economic environment that may require intervention to avoid further contraction.
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