This month will be the first PMI release after almost twenty-four months or more where services growth is out-spacing manufacturing. Though these are early signs of a medium-term trend driven by sustainable demand in various service sectors especially related to travel and other related services.
On the other hand, manufacturing numbers are getting tired of now as there are signs of exhaustion in many areas. To point a few, many countries are facing slower to negative growth in the order book and for some countries, the inventory is piling up leading to lower incremental purchases.
If details are to be looked at then Global Manufacturing PMI is showing initial signs of burnout or slowing before the bigger slide. This would be due to a backlog of supply stuck in China and some part due to the reduction in the demand giving a stagnation to the growth.
On the positive side, the service industry needs its golden months. Especially since inflation is eating into wages the highest employing sector needs to perform well to be able to drive absolute wages and jobs at a sustainable level.
The crucial phase will be the next three to fourth months as summer break starts for many countries that were dependent on the service sector pre-covid. This would provide a cushion to help minimise the downside in GDP while manufacturing slows down. Two risks could dampen the service industry, one in return for a more severe covid wave and the other is disposable income going to saving as inflation strengthens.