Please consider the March 2023 Services ISM^® Report On Business^®

• “In March, the Services PMI® registered 51.2 percent, 3.9 percentage points lower than February’s reading of 55.1 percent. The composite index indicated growth in March for the third consecutive month after a reading of 49.2 percent in December, the first contraction since May 2020 (45.4 percent). 
• The New Orders Index expanded in March for the third consecutive month after contracting in December for the first time since May 2020; the figure of 52.2 percent is 10.4 percentage points lower than the February reading of 62.6 percent.
• “The Supplier Deliveries registered 45.8 percent, 1.8 percentage points lower than the 47.6 percent recorded in February. In the last two months, the index has reflected the fastest supplier delivery performance since April 2009, when it registered 45.5 percent. (Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)
• “There has been a pullback in the rate of growth for the services sector, attributed mainly to (1) a cooling off in the new orders growth rate, (2) an employment environment that varies by industry and (3) continued improvements in capacity and logistics, a positive impact on supplier performance. The majority of respondents report a positive outlook on business conditions.”

Bloomberg Expectations

The final paragraph above seems to put a hugely overoptimistic spin on the Index.

The Bloomberg Econoday consensus expected a slight pullback: "After 55.1 in February, the ISM services index in March is expected to slow slightly to a still solid 54.4."

Mish Notables 

• New orders didn't just "cool", they plunged 10.4 points. 
• New export orders plunged 18 points into deep contraction at 43.7.
• The backlog of orders contracted for the first month, at 48.5.
• Employment is still positive at 51.3 but that will not last if backlogs continue to contract.
• Supplier deliveries indicate a second month of weakness. 
• Prices point to stagflation, for now, but I expect further weakness. 

Manufacturing ISM Contracts for the 5th Month, With New Orders Falling Rapidly

On April 3 I noted Manufacturing ISM Contracts for the 5th Month, With New Orders Falling Rapidly.

Every component of the ISM is in contraction. Prices are finally in contraction and the ISM suggests the overall economy has been contracting for four months. 

Not Just Goods and Manufacturing

Please note that optimists will soon not be able to hide under the mantra "It's just weakness in goods."

This is a sudden shift in orders that I expect will be pervasive and lasting.

Meanwhile ...

Recession Evidence Mounts

• March 31: Real Income Was Negative in 2022 Q4, Big Negative Revisions to GDP
• March 29: Money Supply Is Headed for 6th Month of Contraction

MishTalk Video, What's the Real Risk Now, Is it Inflation or Deflation?

That may seem like a silly question, but please consider this video discussion: What's the Real Risk Now, Is it Inflation or Deflation?

The short answer is Credit Freezes Are Highly Deflationary. See the above link for details and discussion.

Oh, kiss Goldilocks goodbye as well. She just plunged off the cliff along with new export orders in both goods and services.

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