S&P Global’s May flash US Composite PMI was 51.7, the same as April’s 51.7. Manufacturing output rose to 55.3 from 54.5, above the 54 forecast, while Services PMI eased to 50.9 from 51.0.
S&P Global said overall activity grew in May, but at a slower pace than earlier in the year. It added that services growth was weak and tracked towards its softest calendar quarter since late 2023, as new business rose only slightly after a small fall in April.
Manufacturing Output Accelerates
Manufacturing output increased at its fastest rate in just over four years. S&P Global linked part of the rise in new goods orders to precautionary stock building by clients.
Ahead of the release, forecasts pointed to Services at 51, Manufacturing output at 54, and the Composite at 51.7. PMIs are based on executive surveys, where readings at or above 50 show expansion, and below 50 show contraction.
The flash figures were scheduled for 13:45 GMT, with the final version due about two weeks later. The US Dollar is the most traded currency, making up over 88% of global FX turnover, or about $6.6 trillion per day (2022).
Looking back at the data from May 2025, we saw a clear split between strong manufacturing and a sluggish services sector. The Federal Reserve responded to overheating inflation with a series of rate hikes throughout the second half of that year. Now, in May 2026, the economic picture has shifted significantly due to that tightening cycle.
Market Implications For Traders
The robust manufacturing output we observed in 2025, which peaked at its fastest rate in four years, has since cooled considerably. Higher borrowing costs have curbed investment, and recent manufacturing PMI data has hovered around the 50.2 mark, indicating only slight expansion. Traders should consider options strategies that protect against further downside in industrial sector stocks.
The services sector, which was already showing weakness last year, continues to signal a slowdown. Recent initial jobless claims have ticked up to 231,000, a level not seen in months, reinforcing that the tight labor market of 2025 is softening. This data increases the probability of a dovish pivot from the Fed, making long positions on interest rate futures more attractive.
While the rate hikes of 2025 were successful in bringing inflation down from its peak, the latest CPI reading of 3.4% shows progress has stalled. We are now in a situation where growth is slowing, but inflation remains stubbornly above the 2% target. This puts the Fed in a difficult position and explains why the VIX has climbed to over 15 in recent weeks.
The strong US Dollar, which was a dominant theme in 2025 due to rate hike expectations, is now facing headwinds. As the market prices in potential rate cuts later this year, the dollar’s yield advantage is eroding. Derivative traders should monitor the EUR/USD pair, which has recovered from its 1.15 lows of last year and could see further upside if signs of economic weakness continue to build.
