The brief April bounce in US Services economy has died as PMI slipped back to 51.3 as Markit warns "the service sector reported one of the weakest expansions since the recession." This weakness was followed by ISM Services which plunged to its lowest since Feb 2014, crushing the hopes of the April bounce. Employment plunged into contraction and New Orders tumbled, with the surveys pointing to GDP growing at an annualised rate of just 0.7-8% in the second quarter.
Bye bye April bounce!!
ISM Services Breakdown shows weakness across the board...
Seasonally-adjusted New Orders plunged...New Orders Index -5.7pts (biggest drop since Feb. 2008) to 54.2 (lowest since Feb. 2014).
Respondents did not offer much hope...
- "Projects from the oil companies are becoming less and less. Budget problems for capital projects." (Construction)
- "There has been a general slowing-down from the momentum we saw last month." (Professional, Scientific & Technical Services)
- "Slower start to the second quarter." (Arts, Entertainment & Recreation)
- "Holding steady. No real increase, but expansion plans on for late Q3 or Q4 in preparation for 2017." (Finance & Insurance)
- "Pending labor concerns to replace an aging workforce of highly-skilled staff support positions." (Educational Services)
- "High pressure on cost reduction due to declining top line sales." (Retail Trade)
- "Significant drop in shipments for the month. Estimate a decline of nine percent for the markets we serve. Overall retail traffic has slowed. Pricing has stabilized in the market." (Wholesale Trade)
As Markit noted, summarizing the disappointing state of the US Services economy:
“The service sector reported one of the weakest expansions seen since the recession in May, adding to signs that any rebound of the economy in the second quarter may be disappointingly muted.
“With optimism about the business outlook dropping to a new post-crisis low, companies are expecting conditions to remain challenging in coming months, citing uncertainty about the presidential election as well as broader worries about weak demand at home and abroad.
“Add these disappointing service sector numbers to the downturn now being seen in manufacturing, and the PMI surveys point to GDP growing at an annualised rate of just 0.7-8% in the second quarter, notwithstanding any marked change in June.
“The slowdown and further drop in optimism continued to cause companies to pull-back on recruitment, with the survey signalling just under 130,000 extra jobs being created in May, driven entirely by the service sector.”
It seems like the last pillar of sustainable smoke and mirrors has broken.
Charts: Bloomberg