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US Services Economy Weakest Since January As New Orders, Employment Tumble (But ISM Surges)

Following the "baffle 'em with bullshit" beats and misses, improvements and deteriorations in China's Services and Manufacturing PMIs, this morning we round out the US data. After US Manufacturing rose (Markit PMI) and dropped (ISM), US Services PMI dropped to 54.8 and has not been lower since January (despite modestly beating the preliminary print) amid the weakest new order volume since January and poorest employment growth in 8 months. As Markit warns, "the survey data also reinforce strong arguments – notably a continued absence of inflationary pressures – that there is no rush to tighten policy." But then, just to top off all the idiocy, ISM Services surges from 56.9 to 59.1, smashing expectations confirming the "baffle 'em with bullshit" meme.

 

With China entirely confusing in both Services and Manufacturing PMIs...

 

It is perhaps not surprising that US Manufacturing is both improving and collapsing...

 

But Services PMI dropped to its lowest since January as ISM Services spiked...

 

As Markit notes, as was the case with activity, new business volumes also increased at a slower rate in October. Moreover, with the latest expansion of new order books the slowest since January, companies were more cautious with regard to their hiring policies, with service sector employment rising at the weakest pace since February.

Services PMI notes deterioration in:

  • - Client demand
  • - New Busines
  • - Order Books
  • - Employment
  • - Inflation
  • - Optimism

But ISM Services saw everything improving...

 

As seasonal adjustments crate a surge in new orders that was entirely not present in reality...

 

All of which serves to confuse....

The PMI surveys indicated that the pace of economic growth held steady in October, but remains weaker than the rate seen throughout much of the year so far. Job creation also slipped to the lowest seen for eight months, as service sector firms in particular have become increasingly nervous about committing to additional headcounts.

 

“The surveys nevertheless signal ongoing moderate growth of business activity and employment in the manufacturing and service sectors, which will keep alive the possibility that policymakers could be persuaded into raising interest rates before the year is over. However, the survey data also reinforce strong arguments – notably a continued absence of inflationary pressures – that there is no rush to tighten policy.

 

“Much will now depend on the November survey data, which will provide a reliable guide to business conditions in the fourth quarter.”

Charts: Bloomberg