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US Services Economy Tumbles To Weakest Since Weather-Crushed January

In January when Markit Services PMI printed 54.2, the weakness was blamed on weather (and port strikes). Now it is sunny October, following the warmest September ever on Earth, and Services PMI has plunged to 54.4 - its lowest in 9 months (handily missing the 55.5 bounce expectation). This flash data shows the weakest payroll numbers since February and business confidence remains just marginally higher than the three-year lows of July. As Markit warns this weakness "will add to calls for policymakers to delay hiking interest rates until the economy finds a firmer footing."

 

 

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

“The flash services PMI came in below market expectations in October, indicating a steeper than anticipated slowing of the economy as it entered the fourth quarter. Combined with the manufacturing results released last week, the services PMI survey indicates that the pace of economic growth slowed in October to the weakest since January, when business was hit by extreme weather.

 

“The surveys suggest the economy started the fourth quarter expanding at an annualized rate of 1.8%, down from the 2.2% pace signalled for the third quarter.

 

“The warning lights are also flashing brighter in relation to the outlook. Business optimism slipped to one of the lowest seen since the global financial crisis, and employment growth fell markedly in October.

 

“With the survey also finding price pressures to have remained subdued, especially in terms of wages, the sharper than expected slowdown in October will add to calls for policymakers to delay hiking interest rates until the economy finds a firmer footing.”

Charts: Bloomberg