US Economy Slows but Stays Strong: September PMI Signals Steady Growth

The US economy showed signs of cooling in September, yet it remains firmly in expansion territory, according to the latest flash S&P Global Composite PMI data. Dropping slightly to 53.6 from 54.6 in August, the Composite PMI reflects a private sector that continues to grow, though with less vigor than earlier in the year. Any reading above 50 signals expansion, and this dip suggests the economy is facing challenges in maintaining its earlier momentum. Despite the slowdown, the data points to a robust third quarter, with the economy expanding at an annualized rate of approximately 2.2%.

Breaking down the numbers, the Manufacturing PMI eased to 52 from 53, indicating that while factories are still producing at a healthy clip, growth is losing some steam. The Services PMI, a larger component of the economy, also slipped to 53.9 from 54.5, hinting at softening demand in this critical sector. These figures align with expectations, as analysts had forecasted a Services PMI of 53.9 and a Manufacturing PMI of 52.0. The steady, if slightly slower, expansion in both sectors underscores the economy’s resilience amid global uncertainties.

The US Dollar held its ground following the PMI release, with the US Dollar Index (DXY) hovering around 93.40. Currency markets showed mixed reactions, with the dollar posting modest gains against most major currencies. Notably, it strengthened most against the New Zealand Dollar, gaining 0.19%, while remaining nearly flat against the Japanese Yen and Swiss Franc. The Euro and British Pound saw slight declines against the dollar, reflecting cautious market sentiment as investors await further economic cues.

Looking ahead, attention is shifting to Federal Reserve Chair Jerome Powell’s upcoming speech, which could provide clarity on the central bank’s rate cut plans. Investors are particularly focused on sub-indices within the PMI report, such as employment and inflation, as they await Friday’s Personal Consumption Expenditure (PCE) Price Index data. These metrics will offer deeper insights into the economy’s health and the Fed’s next moves. Upbeat PMI figures could fuel optimism for Wall Street’s ongoing rally, while weaker-than-expected numbers might stoke fears of sharper interest rate cuts, potentially pressuring the dollar further.

The EUR/USD pair, a key barometer of currency market dynamics, has been trading in a tight range near 1.1800 since mid-August. Despite reaching a 2025 peak of 1.1918 following the Fed’s latest policy announcement, the pair has struggled to sustain upward momentum. Technical indicators suggest cautious optimism among traders, with buyers defending the 1.1720 level. While the PMI data is unlikely to trigger significant moves, a break above 1.1830 could signal renewed bullishness, though the 1.2000 threshold remains a distant target.

Overall, the September PMI data paints a picture of an economy that is slowing but still expanding steadily. With central banks globally maintaining a cautious stance, the US economy’s ability to sustain growth will be closely watched. As markets await Powell’s remarks and further data, the balance between optimism and caution will likely define the near-term trajectory for both the dollar and broader financial markets.