On Friday, the PMI Flash Services reading registered growth that fell sharply, not only well below the Econoday Consensus estimate of 56.1, but also substantially below the lowest estimate of 55.8.
The services PMI is slowing sharply this month, to 53.7 vs 56.1 for the final November reading and vs 56.5 for the flash reading. This is the lowest reading in a year reflecting the slowest growth in new orders since January and a fifth straight month of contraction in backlog orders. Optimism over future growth is understandably down, reflecting what the report says is a subdued global outlook, election uncertainty and softer demand in the energy sector. Price readings remain subdued with inputs at their weakest pace since February. Despite weakness in orders and the downcast outlook, hiring is described as “resilient”. Given weakness in global demand, the service economy is the nation’s bread and butter and today’s report, though only one data point, hints at slowing for the economy.
I tend not to report on the Markit readings for services, instead reporting on ISM readings. But this was sharp divergence. The next ISM services report will be interesting to watch.
If services contract, recession will be at hand.
Mike “Mish” Shedlock
