While correlation is not causation, one would have to be an ignorant unicorn-worshipper to believe that a collapse in America's manufacturing would not have some follow-through. Following the crash in Manufacturing, Markit reported America's Services economy massively missed expectations and plunged to 53.7, lowest since Dec 2014. New orders plunged to the lowest since January 2015 and employment tumbled. As Markit reports, this is "disappointing news for an economy which has seen the first US interest rate hike for almost a decade."
Commenting on the flash PMI data, Chris Williamson, chief economist at Markit said:
“A lack of inflationary pressures, slowing growth and a drop in business confidence to a five-year low are all disappointing news for an economy which has seen the first US interest rate hike for almost a decade. The Fed projections point to a further four quarter point hikes in 2016, ut with data as weak as these, we’re likely to see a far less aggressive rate hike progression.
The survey data are consistent with gross domestic product rising at an annualised rate of 1.8% in the fourth quarter. That’s down only slightly from the 2.1% pace observed in the third quarter, but the survey shows a more severe slowing towards the end of the fourth quarter, with an annualised GDP growth rate of just 1.4% indicated for December alone.
Hiring remained encouragingly resilient in the face of the weaker growth trend, pointing to a non-farm payroll increase of 170,000. That’s below the average of 201,000 signalled in the preceding 11 months of the year (and below the official year-to-date average of 210,000), but still strong.
However, with business expectations about the year ahead dropping in the service sector to the lowest since August 2010, the sustained growth of hiring may soon peter out unless demand revives.”
Charts: Bloomberg