US Services Economy Slides (Or Rebounds) As Surveys Signal Nothing But Confusion

After Manufacturing data showed a jump (Markit) or dump (ISM), US Services data was expected to rebound (Markit) or relapse (ISM) in October.

To summarize the divergences

  • Markit's Manufacturing PMI printed higher at 55.7 (marginally higher than September's 55.6 but below the October flash print of 55.9)

  • ISM Manufacturing printed dramatically lower at 57.7 (well below expectations of 59.0 and down from September's 59.8)

  • Markit's Services PMI printed higher at 54.8 (solid rebound from September's 53.5, 8-mo lows and above the flash October print)

  • ISM Services printed lower at 60.3 (well above the 59.0 expectations but down from the 61.6 record high in September)

In pictures - it seems the people who Markit is surveying are considerably more optimistic than the ones ISM is interviewing...


Under the covers of ISM Services data we see that employment, new orders and prices are all down...

All of which are odd given that Markit sees higher prices, better employment, and high expectations for new business...

Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

A rebound from a weather-torn September and strong demand propelled service sector growth in October. Combined with the steady output growth being recorded in the manufacturing sector, the survey data suggest the economy grew at its fastest rate since July.

Expectations of future business growth spiked higher, suggesting companies are expecting a strong end to the year for the economy.

Average selling prices for goods and services rose at a rate only marginally below September’s tenyear survey record high, however, indicating that intensifying inflationary pressures remain a key concern.

Price rises often reflected the need to pass higher costs on to customers, in turn often linked to tariffs, upward wage growth and higher interest rates. Consumer price inflation therefore looks set to remain elevated.”

Finally, Williamson signals silver linings ahead...

“Comparisons with GDP indicate that the latest survey data translate into an annualised rate of economic growth of around 2.5%, representing a solid start to the fourth quarter."