March Madness – Private sector strengthens despite banking turmoil

March Madness – Private sector strengthens despite banking turmoil

March 30, 2023

From the desk of Vance Howard:

The HCM-BuyLine® is positive and held up well in the face of the very nasty storm the banking crises caused over the last three weeks. The technical patterns are shaping up, and I hope shaping up to the upside. If QQQ, which is tech heavy, can break above $313.00, we would consider this a bullish sign of strength and we would find it very encouraging. Meanwhile, the SPY ETF chart shows that the S&P 500 is trying to move higher but is still in a trading range.

PMIs show private sector activity strengthening: The S&P Global Flash U.S. Composite PMI jumped 3.2 points in March to 53.3, in expansion territory for the second consecutive month, and at the highest level since last May. The survey does not show any immediate negative impact on activity from the banking sector crisis that unfolded mid-month. Quite the opposite, it reflects stronger growth in Q1 than in the second half of last year which the index spent continuously below the break-even level of 50.

The improvement in March was led by the Flash Services PMI, which also rose 3.2 points to 53.8, an 11-month high, and above the consensus of 50.3. In a sign that demand is firming, new orders grew for the first time since last September, with both domestic and export orders improving. Backlogs picked up at a quicker pace, another indicator of stronger demand and some capacity pressures. This led to more job creation, with employment rising at the fastest rate since last September. Cost inflation continued to ease, but selling price pressures picked up to a five-month high, driven by stronger demand. Service sector optimism about the growth outlook came down slightly from the prior month and remains below the series average, reflecting concerns about the impact of inflation and higher interest rates.

Vance Howard

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