by MishISM Non-Manufacturing vs ISM Manufacturing

Non-manufacturing production, new orders, prices, and inventories are all ups strongly. Employment was the laggard.

The past relationship between the NMI® and the overall economy indicates that the NMI® for April (57.5 percent) corresponds to a 3.3 percent increase in real gross domestic product (GDP) on an annualized basis.

That quote is from the same folks who predicted 4.3% GDP growth in the first quarter.

Markit Services PMI

Image placeholder title

Markit: “Business Activity Subdued”

The Markit Services PMI report headline reads “Business activity continues to rise at historically subdued pace in April”.

Key Findings

  • New business continues to increase but at modest pace
  • Slowest rise in employment since July 2010
  • Input price inflation accelerates to highest level in 21 months


Growth of business activity was sustained in April, albeit at a relatively modest pace in line with fairly limited gains in new orders. With companies able to comfortably deal with current workloads, staffing levels rose at the slowest pace in nearly seven years.
On the price front, input costs increased at a sharper rate, but competitive pressures meant that charges were raised to the weakest degree for five months.
Faced with underwhelming growth in new business, the vast majority of companies (90%) reported no-change to their workforce numbers during the month. The net result was the weakest growth in employment signaled by the survey since July 2010.

Comments by Chris Williamson, Markit Chief Business Economist

  • “The final services PMI came in above the earlier flash estimate but remained only marginally higher than March’s six-month low.”
  • “Combined with a weak manufacturing PMI reading, the surveys suggest that business activity is growing at a slower pace than seen over the first quarter as a whole.”
  • “However, a robust rise is likely to be seen in second quarter GDP as the official numbers exhibit greater seasonality than the PMI, with consistently weak first quarters being typically followed by a rebound in subsequent periods. For this very reason, GDP data seemed to signal weaker growth than implied by the PMI in the first quarter of 2017.”

Markit predicted 1.7% GDP growth for the first quarter.

Now Williamson calls for a “robust rise” in second-quarter GDP.  It is unclear if he means to something like 2% or something much higher.

Comparing the Reports

Since both reports measure the same thing and even some of the same companies, the surveys ought to be similar but they aren’t.

There are two items the reports do agree on: A slowdown in hiring and price pressures.

Businesses are unable to pass on rising input costs. If accurate, that’s a pretty telling aspect of real consumer demand.

Those looking for robust GDP in the second quarter should consider Tracking GDPNow Forecasts vs. Reality: What About that Initial 2nd Quarter Estimate?

Mike “Mish” Shedlock

Another ISM/PMI Divergence: Non-Manufacturing

On April 3, I noted a huge discrepancy between the ISM manufacturing report and Markit’s PMI manufacturing report.

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

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.

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

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

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.

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 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.

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.

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.