Markit’s Services PMI fell to just 51.2 in May, dropping a rather large 1.6 points from 52.8 in April. That meant the combined US Composite PMI, which puts together both manufacturing and services, was barely above 50, registering just 50.8. As with all PMI’s the distinction around 50 is unimportant, what matters is the direction and for more than a single month. On that count, services reflect what we have seen in manufacturing: that the ‘rebound’ in March and April was nothing more than a small relative improvement after the liquidation-driven start to the year. The economy didn’t get better, it for a few months just failed to get worse.
In terms of the Services survey, Markit reports several distressing indications including respondents’ views for the immediate future:
May data highlighted a renewed fall in business optimism across the service economy. Reflecting this, the balance of service sector firms forecasting a rise in business activity over the year-ahead eased to its lowest since the survey began in October 2009. Anecdotal evidence suggested that uncertainty related to the presidential election and concerns about the general economic outlook had continued to weigh on business confidence. [emphasis added] While I don’t want to overemphasize individual parts of individual sentiment surveys, it is quite a contrasting summation with the apparent self-delivered economic approval of the FOMC to execute the next policy communication (rate hike in name only). And this is not manufacturing, it is the services component that is supposed to steer the economy far away from the ‘manufacturing recession.’ That was always a dubious proposition, particularly when so much of the supposed ‘services economy’ itself relates to the transportation, management, and then sale of goods.
This post was published at David Stockmans Contra Corner by Jeffrey P. Snider ‘ May 26, 2016.
Recent Comments