U.S. factory activity rises in June, New home sales fall in May

Yahoo Finance's Emily McCormick breaks down the lates manufacturing PMI data and new home sales in May.

Video transcript

- We got a flash reading on activity in the services sector from market economics out about 15 minutes ago. And new home sales also hitting at 10:00 AM. Yahoo Finance's Emily McCormick joins us now with some of the details on this latest data dump. Emily.

EMILY MCCORMICK: Well, Miles, I'll start off with those PMIs that we got from IHS Markit. A bit of a divergence we saw between the manufacturing sector and service sector activities in May-- or in June, I should say, in the US. Although, we did see both of these coming in at still elevated levels. So IHS Markit's US manufacturing Purchasing Managers Index rose to a record high of 62.6 according to this preliminary monthly report for June. That rose from 62.1 in May, and did beat estimates for 61.5. You should note that readings above the neutral level of 50 indicate expansion in a sector. So the manufacturing sector at least definitely firmly in expansionary territory.

But turning to service sector activity, one highlight that we did see a big miss there. We saw activity pulling back from a record high from May. The Purchasing Managers' Index for services falling more than expected to 64.8 from 70.4 in the prior month, which had been an all time high. Now economists were looking for a reading of 70 for June.

And some extra commentary that we saw on these readings from IHS Markit. The firm noting that private sector businesses were still reporting issues with higher prices, difficulties finding staff, and, in fact, should highlight that the rate of job creation was the slowest in three months in the service sector in particular. Now IHS Markit also said that price pressures remained elevated in June in both manufacturing and service sectors, and that the rate of input price inflation softened slightly, but was still the second fastest on record. So overall, all signs still pointing to a recovery here in the US across both sectors of the economy, but some of these supply and demand mismatches are capping that growth.

Now turning our attention to new home sales. That just crossed the tape about seven minutes ago. Those unexpectedly falling for a back-to-back month in May according to the Commerce Department. Those are down by 5.9% last month compared to a rise a 0.2% expected. And this did bring new home sales down to a seasonally adjusted annualized rate of 769,000. And it also comes following a downwardly revised monthly drop of 7.8% in April. Also worse than what had been previously expected.

So again, Miles, seeing the supply and demand mismatches, these tight inventory levels weighing on prices and really bringing those up higher weighing on affordability, also crimping some activity here in the housing market. Guys.

- All right, Yahoo Finance's Emily McCormick with the latest on another interesting set of economic data out this morning. Emily, Thanks for that.