by Mish

Today, both companies gave their assessment of non-manufacturing also known as services.

The discrepancy remains. At least one of the companies is way off base in regards to GDP estimates.

The ISM Non-Manufacturing Report on Business notes business activity increased for the 92nd consecutive month.

Fourteen industries reported increased business activity and two industries reported decreased activity for the month of March. Employment expanded for 37 months.

The Business Activity Index is a robust 58.9 down from 63.6. New Export orders rose.

Following the manufacturing report, the ISM assessed first quarter GDP at a whopping 4.3%. The ISM did not update that forecast today.

Markit U.S. Services PMI

In contrast to ISM, the Markit U.S. Services PMI reports the slowest growth of US service sector for six months.

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Latest data also showed input costs rising at a solid rate, although a desire to strengthen profitability meant higher costs were passed onto clients wherever possible. The seasonally adjusted Markit U.S Services Business Activity Index remained above the 50.0 no-change mark in March to extend the current period of growth to 13 months.

However, the index continued to fall from January’s recent peak, reaching a six-month low of 52.8 (February: 53.8).

Operating costs continued to increase during March, with inflation underpinned by rises in labor costs and higher prices for basic materials and food products. The overall increase in input costs was solid and slightly higher than the pace seen in February.

Markit Composite vs GDP

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Chris Williamson, Markit Chief Business Economist, Comments

  • “The March PMI numbers add to the picture of a relatively modest opening quarter to 2017 for the US economy. The surveys of manufacturing and services are running at levels consistent with GDP expanding by 1.7% in the first quarter.”
  • “Growth of business activity appears to have peaked in January, sliding to a six-month low in March.”
  • “The loss of momentum is linked to weaker inflows of new work, with the surveys providing some evidence that demand is being dented in part by higher prices.”
  • “However, business confidence, although up on February, has failed to regain the levels seen at the start of the year, suggesting a less ebullient mood has developed among companies than seen in the immediate aftermath of the presidential election. ”
  • “This lower degree of business optimism has translated into weaker hiring, with the March surveys indicating the smallest net gain in private sector employment since last October.”

Markit pegs GDP at 1.7% and ISM at 4.3 percent noted on April 5 in, Markit PMI vs. ISM Fantasyland GDP Projection: Stagflation Lite?

Both ISM and Markit are diffusion indices of similar companies. The discrepancies, especially the GDP estimates, should not be this wide.

I will post my own assessment of first quarter GDP shortly.

Mike “Mish” Shedlock

Services PMI and Non-Manufacturing ISM Diverge Strongly Again

The soft data divergence between the ISM Non-Manufacturing Report on Business and the Markit Services PMI widened again today. Let’s take a look at each report.

Markit PMI vs. ISM Fantasyland GDP Projection: Stagflation Lite?

The discrepancy between the ISM’s Report on Business and Markit’s Manufacturing PMI assessment of the economy widened today.

ISM-Markit Manufacturing Divergence Widens Again

The divergence between the ISM Report on Business and the Markit PMI manufacturing index widened this month. ISM increased slightly from 54.8 to 54.9 while the Markit reading declined slightly to an 8-month low of 52.7 from 52.8

Tale of Two Indexes: Non-Manufacturing ISM vs Markit PMI

The ISM Non-Manufacturing Index strengthened in October. Markit's Service PMI weakened.

ISM-PMI Divergence Widens: Markit Estimates 2nd Quarter GDP at 1.1%, Says Profit Squeeze Underway

Unlike their counterparts at the ISM, Markit sees growth in both services and manufacturing weakening with U.S. private sector growth at a seven-month low in April.

Slower Expansion in Non-Manufacturing ISM and Markit Services PMI

Business activity growth softened to a 7-month low in Dec. according to Markit. ISM expansion was less than expected.

ISM and Markit Manufacturing Reports Skewed by Energy Sector and Airplane Orders?

The divergence between Markit’s US Manufacturing PMI and the ISM’s “Report on Business” narrowed a bit today with both numbers retreating a bit but ISM cooling more.

2nd Quarter GDP Estimates from ISM and Markit

On July 3, we discussed the divergence between the Markit and ISM diffusion indexes for manufacturing. Today, let’s look at ISM Nonmanufacturing vs Markit Services.

ISM vs Markit PMI Divergence Widens Again: Believe Markit

The manufacturing soft-data reports have been nearly unanimous in reporting widespread strength that has not shown up in any hard data reports.