"Dig Deeper & The Picture Darkens" - ISM Services Survey Plunges To 19-Month Lows

After the "baffle 'em with bullshit" mixed picture on Manufacturing (ISM up, PMI down), all eyes were on Services for a signal of green shoots (which were just as mixed in February with ISM up and PMI down), BUT the signal was ugly!

  • US Manufacturing PMI dropped to weakest since June 2017

  • US Manufacturing ISM rebounded from Nov 2016 lows

  • US Services PMI dropped from 8-month highs

  • US Services ISM dropped to 56.1 from 59.7 to lowest since Aug 2017

So there you have it...no disagreement there - both ISM and PMI agree that services are slumping...

The Services ISM data was led by a collapse in New orders...


The US composite PMI slipped in March to 54.6 from 55.5 (as employment tumbles to weakest since June 2017)

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

“Another solid service sector performance helped offset a deteriorating trend in manufacturing to leave the PMI surveys indicative of robust economic growth in March. For the first quarter as a whole, the surveys are consistent with the economy growing at an annualized rate of approximately 2.5%, painting a relatively rosy picture compared to official data, which so far suggest GDP could come in slightly weaker."

However, Williamson is not entirely convinced...

Dig deeper and the picture darkens. Inflows of new work have moderated markedly compared to this time last year as manufacturing weakness and growing concerns about the economic outlook have increasingly spread to the service sector. Business optimism about the year ahead is now the lowest for two and a half years, posing downside risks to growth in coming months.

“Hiring has already been hit by the drop in business optimism and weakened inflows of new work, easing to the lowest since mid-2017, albeit still indicating non-farm payroll growth of around 165,000.

“However, the surveys also provide evidence that hiring is in part being constrained by labor shortages, which is limiting capacity in both manufacturing and services, causing backlogs of work to build up again in March and suggesting that businesses – especially in the service sector – will remain busy in the near term at least.”

Finally, we note that despite all the talk of global green shoots and a soaring stock market, private sector business confidence took a tumble in March, with the degree of optimism dipping to the lowest since September 2016.

But don't worry, China's PMI bounced!!