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US Services Economy "Bounce" Is Dead, "Warning Lights Are Flashing Brighter"

After widespread weakness in global (yes and US) manufacturing PMIs, US Services PMI dipped in September (after 2 months of modest bounce back). The pace of expansion slowed to three-month lows with service sector confidnce close to its lowest in three years. This latest print indicates a slowdown in overall new business growth for the second month running, which brought the pace of expansion down to its weakest since January. Prices dropped for the 2nd month in a row and Markit warns that "various warning lights are now flashing brighter, meaning growth may continue to weaken in coming months."
 

 

 

Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said:

“The survey data point to sustained steady expansion of the US economy at the end of the third quarter, but various warning lights are now flashing brighter, meaning growth may continue to weaken in coming months.

 

“Although the surveys suggest the economy expanded at a 2.2% annualised rate in the third quarter, growth slowed in September and could weaken further in coming months. Business optimism slumped to one of the lowest levels seen since the global financial crisis, inflows of new business rose at the weakest rate for eight months and job creation slipped to a six-month low. Growth is also becoming increasingly reliant on the services economy as manufacturers struggle against the strong dollar and weak demand in export markets.

 

“Average prices charged for goods and services are falling at the fastest rate seen since the survey began in late-2009, suggesting consumer price inflation will weaken in coming months.

 

“With growth slowing, warning lights flashing and charges falling at the fastest rate for at least six years, the survey data play into the hands of dovish policymakers and will reduce the odds of interest rates rising any time soon.”

Charts: Bloomberg