The S&P 500 is navigating a complex economic landscape as recent PMI data reveals contrasting sectoral performances, according to Citi's latest analysis. The S&P Manufacturing PMI fell to 48.3 from 49.7, indicating continued contraction, while the Services PMI surged to 58.5, its highest since 2021. "The PMIs continue to show a manufacturing sector that is struggling while the services sector gains further growth momentum," Citi analysts note. Despite robust services activity, employment indices show only modest expansion, with the services employment index at 50.7 and manufacturing at 50.2. Citi expresses skepticism about sustained growth, citing potential labor market weakening and structural factors like modest rent inflation and slowing wage growth. The report also highlights disinflationary trends, with falling input and output prices in services, suggesting inflation may ease further. As the S&P 500 reflects these mixed signals, Citi remains cautious about the economic outlook into next year.