Following Monday's confusing manufacturing data (PMI up, ISM down), today's Services economy data suggests growth is just as confused and muted as PMI flatlined from June with activity at its weakest in 5 months and new business slowing down. ISM Services missed expectations (dropping modestly to 55.5 from 56.5) with employment dropping from 52.7 to 51.4 (despite a bump in new orders). But, as Markit concludes, "those looking for signs of the US economy moving up a gear in the third quarter will be disappointed by the PMI readings for July."
Flat or down... not what Obama ordered...
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ISM Breakdown is mixed... buit not reassuring
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Respondents offer some insight as to where the bounce has come from...
"Seasonally, July is slightly down from June, but sales are up for the year. We are tracking pretty close to [the] sales forecast, which was for strong growth." (Management of Companies & Support Services)
"Lower oil and chemical pricing is affecting the overall business for new projects (capital spending is down)." (Construction)
"Brexit will pose new challenges to deals in our industry, but a bit early to tell what they may be (new regulations, etc.)." (Finance & Insurance)
"Performance against adjusted guidance for 2016 continues to meet objectives. The company saw no impact from recent global events, such as [the] UK vote to leave the EU." (Health Care & Social Assistance)
"Stabilization in oil prices has led to a steady increase in field service work and new construction projects." (Mining)
"Business is currently down in the renewal energy sector, waiting [for] the uptick this fall." (Professional, Scientific & Technical Services)
"Activity [is] ramping-up as the government enters its fourth quarter." (Public Administration)
"Business conditions have remained consistent over the past month. New and completed activities are offsetting one another." (Retail Trade)
"Hot weather [is] affecting commodity prices as well as store traffic." (Accommodation & Food Services)
"Good, stable pricing levels; consumer spend also looks positive. Low fuel prices, summer vacation schedules and warm weather driving a lot of activity." (Wholesale Trade)
Simply put - the weather, and the government!
Commenting on the PMI data, Chris Williamson, Chief Economist at Markit said:
“Those looking for signs of the US economy moving up a gear in the third quarter will be disappointed by the PMI readings for July.
“The surveys are indicating that the pace of economic growth has held at around 1% at the start of the third quarter, largely unchanged on the signals sent by PMIs for the first and second quarters.
“Once again, there’s better news on hiring, with the overall rate of job creation edging up to the highest since January. The surveys are broadly consistent with non-farm payrolls rising by 160,000 in July.
“Hiring is holding up in part because of signs that the soft patch that the economy has gone through may prove temporary. Inflows of new business across the economy rose at the fastest rate seen so far this year in July, and backlogs of work were pushed higher for the first time since last October as a result.
“Business confidence about the outlook is also improving, rising in the service sector to the highest since January.
“These survey results add to the sense that policy makers will be encouraged by the resilience of the labour market in particular, but will want to see signs of stronger economic growth before hiking interest rates again. Another rate hike by the end of the year therefore still looks a strong possibility, though with odds of the timing of that hike skewed heavily towards December.”
And the Composite Services/Manufacturing PMI data suggests anything but solid growth (just don't tell The Democrats)...
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