US PMI data shows contraction in August

The US dollar is gaining strength

By Laila Eid | @Laila Eid | 23 August 2023

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  • The pound sterling has fallen to its lowest level in three months

  • The Canadian dollar is experiencing a decline following the release of the Retail Price Index

  • There has been a contraction in service and manufacturing activities in the US

Canadian retail market: mixed trends impact economy

Retail sales in Canada experienced a marginal 0.1% increase, reaching $65.9 billion in June. However, the following month brought unexpected shifts, as the core retail price index unexpectedly contracted by 0.8% in July, contrary to market expectations of a 0.3% growth. Moreover, core retail sales faced a second consecutive month of decline. Notably, general merchandise retailers and food and beverage retailers were hit hardest, with sales dropping by 1.4% and 0.9% respectively within these sectors.

These fluctuations had broader economic repercussions, as the USD/CAD reached its lowest point in three months, reflecting the complex dynamics at play within the Canadian retail landscape.

PMI readings reflect economic challenges in Europe, UK, and US

Following the release of the PMI readings for the eurozone and the United Kingdom, concerning trends emerged. Notably, German manufacturing activity hit its lowest point since 2020, while both British service and manufacturing activities contracted below the crucial 50 level. The British manufacturing PMI recorded a contraction at 42.5 points, diverging significantly from market expectations set at 45.1 points. Concurrently, the service sector's PMI index dipped to a mere 48.7 points, underscoring the recent slowdown in British economic growth.

This downturn was mirrored in currency markets, as the pound sterling depreciated by 0.5% in today's trading.

Meanwhile, in the United States, the PMI readings revealed a manufacturing sector contraction from 49.0 to 47.0, while the services index dropped to 51.0 in August, down from July's 52.3. These data releases highlight the prevailing economic challenges faced by these regions.