3 Business Services Stocks To Bet On Amid Q4 Earnings Conundrum

The U.S. economy had an unenterprising end to 2015 as the GDP increased at a paltry 0.7% annualized rate in the fourth quarter, bringing its tally for the year to 2.4% – identical to that recorded in 2014. Although the Fed took off its brakes for the first raise in interest rates in nearly a decade in December, on perceived improvement in the economy, the short-term jitters are likely to prevent it from raising it further anytime soon.
 
On the surface, it appears that the economy failed to receive any ‘slingshot’ momentum from strong third-quarter growth, primarily due to the fallout of the growing global malaise on domestic activity. Strong dollar appreciation and the prevailing macroeconomic turmoil, led by the unprecedentedly-weak Chinese growth and a soft European market, continue to adversely affect exports and corporate investment levels.
 
Solid appreciation of the dollar has dented the export basket, as the U.S. goods and services have been rendered expensive upon foreign soil. The trade deficit widened to $566.5 billion and has reportedly subtracted 0.47 percentage point from the GDP growth in the fourth quarter. Lower oil prices have further added to the woes of the industries that directly or indirectly source businesses from the energy sector.
 
The Negative Feelers
 
Non-defense capital goods orders (excluding aircraft), one of the closely watched parameters for business spending plans, contracted 4.3% in December – the largest decline of this kind since November 2009. Business spending on equipment contracted 2.5% in the fourth quarter compared to a 9.9% rise in the third quarter.
 
With low demand for U.S.-manufactured items, businesses accumulated $68.6 billion worth of inventory in the fourth quarter, shaving 0.45 percentage point from the fourth-quarter GDP growth. Weighed down by higher levels of inventory, overall business investment declined at an annualized rate of 1.8%, the first drop since the third quarter of 2012.
 
The Markit Composite Purchasing Managers Index (PMI) data declined to 53.2 in January from 54.0 in December. This represents a general slowdown in new business growth and a cautious spending pattern by clients.
 
The Positive Vibes
 
When the overall business sentiments are somewhat reeling under the bearish market stance, American households have plenty to rejoice. Buoyed by an average of 284,000 job additions in the fourth quarter, the unemployment rate stood at 5% by the end of 2015 and is expected to fall further.
 
Enjoying the fruits of a resurgent job market, low inflationary pressures and cheaper oil bills, consumer confidence levels went up. The Conference Board Consumer Confidence Index improved moderately in January to 98.1 from 96.3 in December. Consumer spending, which accounts for over two-thirds of U.S. economy, increased 2.2% during the fourth quarter.

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