But the post-weather bounce? Markit's Services PMI in May missed expectations and dropped for the 2nd month in a row to its lowest since January. This notched the Composite PMI also down to its lowest since Jan, leaving Markit warning "the US economy has lost some momentum after an initial bounce-back from weather-related weakness at the start of the year." Worst still, ISM Services thenprinted a notably disappointing 55.7 (against 57.0 expectations) - its weakest since April 2014. The breakdown shows weakness across the board with prices rising. Finally, we note that an incredible 75 of 79 'qualified' economists had an ISM Services estimate that was too high... extrapolated hope springs eternal until it is smashed on the shores of reality.
Services PMI - Bounce...dead...
Commenting on the PMI data, Chris Williamson, Chief Economist at Markit said:
“Slowing service sector growth adds to signs that the US economy has lost some momentum after an initial bounce-back from weather-related weakness at the start of the year.
“May’s PMI data showed service sector activity rising to a slightly smaller degree than signalled by the flash reading. Alongside the slowdown in manufacturing, the services PMI points to the weakest pace of US economic growth since January.
“While the survey still supports the view that GDP growth looks set to recover after the 0.7% rate of decline seen in the first quarter, the softness of the data raises big question marks for policymakers over the strength of the rebound and whether the economy is losing momentum as it heads into the summer.
“The strong dollar is clearly hurting, with new orders growth deteriorating in both manufacturing and services. On the other hand, order books growth remained strong enough to encourage firms to take on staff in increasing numbers in May, leading to the largest rise in employment for almost a year. With the job market gains pushing the economy towards full employment, policymakers may consider rate hikes appropriate even in the face of slower growth.”
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Then ISM Services collapsed...
and the breakdown shows weakness across the board with prices rising.
Blame for the weakness runs the gamut:
- "Avian influenza is causing major issues within the poultry industry. Uncertainty has caused us to adopt a ‘hand-to-mouth’ procurement strategy." (Agriculture, Forestry, Fishing & Hunting)
- "In most regions, the construction business is picking-up. Weather conditions have helped with this pick-up." (Construction)
- "Generally everything remains the same, slight increase towards offshore alternatives starting to pick up speed." (Finance & Insurance)
- "Moderate recovery continues with all signs pointing to rebound in the fourth quarter." (Educational Services)
- "Current level of new orders is still flat. Expecting uptick in the near future." (Professional, Scientific & Technical Services)
- "Increased retail sales; stronger housing market; increased employment." (Public Administration)
- "Business steady, little or no change. Annual year-over-year growth approximately three percent." (Retail Trade)
- "As expendable income continues to be available [due to] lower gas prices, our business continues to increase. The port congestion is hampering deliveries and is keeping inventories at a lower level than desired on imports." (Wholesale Trade)