Following this week's ongoing demise of the US manufacturing sector, tumbling to its weakest since October 2012, Markit US Services PMI collapsed into contraction at 49.8, massively below expectations of 53.5. This is the weakest level for the last pillar standing in the US recovery since the government shutdown in 2013, and as Markit even admits, "slumping business confidence and an increased downturn in order book backlogs suggest there’s worse to come."
- Service providers report least favourable business outlook since August 2010
- The latest upturn in new work was one of the slowest since the survey began in late-2009.
The last leg of the US recovery stool just broke...
As Markit admits:
The index – which is based on approximately 85% of usual monthly replies – signalled the weakest service sector performance since the government shutdown temporarily disrupted business activity in October 2013. Reports from survey respondents suggested that softer underlying new order growth and uncertainty about the economic outlook had weighed on business activity in February.
“The PMI survey data show a significant risk of the US economy falling into contraction in the first quarter.
The flash PMI for February shows business activity stagnating as growth slowed for a third successive month. Slumping business confidence and an increased downturn in order book backlogs suggest there’s worse to come.
“Optimism about the outlook has been on a downward trend over the past two years, with worries about the global economic outlook, financial market volatility, the presidential election and interest rate policy all taking a further toll on business morale in February
While it does not require some PhD-driven leap of economic logic to the man in the street, it appears it never occurs to analysts that when people lose good paying manufacturing jobs they stop spending on services.