Who could have seen that coming? Markit reports that US Services PMI surged to 58.6 in March (considerably better than the 57.0 exp) and the highest in 6 months. Despite the total collapse in US Macro data, the survey says... everything is awesome.
Except, under the covers the report is full of contradictions...
Despite stronger output and new business growth during March, the latest survey pointed to a moderation in service providers’ optimism towards the business outlook. The proportion of service sector companies expecting a rise in business activity over the next 12 months was the lowest since June 2012.
So to summarize...
- Service sector output growth accelerates to its strongest since September 2014 - GREAT!
- Payroll numbers at service sector companies increase at fastest pace for nine months - GREAT!
- confidence towards the business outlook eases to its lowest since June 2012 - WAIT WHAT!
As Markit concludes,
“The US economy is showing signs of regaining momentum after the slowdown seen at the turn of the year. The flash PMI surveys are registering faster growth of both service sector and factory activity at the end of the first quarter, as well as ongoing strong hiring.
“While the surveys signal that economic growth will have slowed in the first quarter from an already modest 2.2% pace seen in the final quarter of last year, the upturn in the surveys in March provides a clear advance indication that stronger economic growth will return in the second quarter.
“While weak economic data for the first quarter will keep Fed rate hikes at bay in coming months, ruling out a June hike, the upturn in second quarter GDP signalled by the recent PMI data ups the odds of interest rates starting to rise at the September FOMC meeting.”