As goes US manufacturing, so goes US services. In a narrative-crushing print, US Services PMI dropped to 54.3 - the lowest since January 2015. Output and New business growth slumped to 11-month lows, optimism dropped, and input cost inflation continued to moderate as "suggests the pace of hiring has slowed since earlier in the year as businesses have become more cautious." Then, confirming this plunge, ISM Services printed 55.3 - its lowest since March 2014 as unadjusted new orders collapsed to their lowest since February 2014.
Sevices PMI tumbles...
Catching down to Manufacturing (who could have seen that coming?)
As Markit notes,
“The PMI surveys show the service sector losing momentum alongside a stalling of growth in the manufacturing sector, pushing the overall rate of economic expansion down to the weakest for a year." The survey also signals robust employment growth, but likewise suggests the pace of hiring has slowed since earlier in the year as businesses have become more cautious in the face of worries such as the forthcoming elections, the strong dollar, global growth jitters and the outlook for interest rates. The December survey data are consistent with non-farm payrolls rising by around 175,000 compared to an average of 200,000 in the first eleven months of the year.
And then ISM hit...and it was a disaster - crashing to levels it was last lower than in March 2014...
Unadjusted new ordrs plunged...
WHAT RESPONDENTS ARE SAYING...
"Business continues to be strong for consulting/operational outsourcing of real estate operations." (Management of Companies & Support Services)"Professional and skilled craft labor is difficult to find." (Construction)"Continued downturn in global energy pricing has given way to reduced costs from vendors." (Mining)"We see continued spend demand higher than any months of this year; however, productivity reaches its peak and projects have to be carried over to 2016." (Professional, Scientific & Technical Services)"Holiday shopping volume is in line with forecast." (Retail Trade)"Currently very busy in the holiday rush season. Purchasing of supplies, postage & freight, and direct labor all more than double non-holiday periods." (Transportation & Warehousing)"The supply chain is faster than in previous years and equipment is more readily available." (Wholesale Trade)"Construction projects continue at a record pace." (Educational Services)
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It would appear the "yeah but The Services Economy will save us" meme just collapsed - so what next?