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August US Service Sector Growth Slumps In “Toughest Month Since Financial Crisis”

Courtesy of ZeroHedge View original post here.

On the heels of dismal manufacturing survey data, all hopeful eyes were on the Services surveys to confirm no contagion into the larger part of the economy.

The flash prints for ISM and PMI Services were weak but the final print for Markit Non-manufacturing PMI fell further (to 50.7) – the weakest since March 2016. On the price front, input costs and output charges fell in August, with cost burdens decreasing for the first time since data collection began in October 2009.

BUT…

Because it wouldn't be 'Murica if the data wasn't completely divergent, ISM reports a better than expected 56.4 for non-manufacturing, rising notably from the 53.7 flash print and well above July's levels

Spot The Odd One Out

Source: Bloomberg

Under the hood of the 'rising' ISM data are 6 components falling and only 4 rising…

So, you decide which is more likely – contagion to the services sector from a collapsing manufacturing sector OR, a huge rebound?

Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“US businesses reported one of the toughest months since the global financial crisis in August, with growth of output, order books and hiring all slowing amid steep falls in both export and business confidence.

Only on two occasions since the global financial crisis have the US PMI surveys recorded a weaker monthly expansion, and these were months in which business was hit by the government shutdown and bad weather in 2013 and 2016 respectively. This time, trade wars and falling exports appear to be the main drivers of weakness, exacerbating fears of a broader economic slowdown both at home and globally.

A major factor behind the deterioration was the spreading of the manufacturing downturn to the service sector, via weakened household and business confidence. Jobs growth is also increasingly being affected by worries regarding the outlook. Overall jobs growth in August was the weakest since early-2012, commensurate with non-farm payrolls rising at a monthly rate of under 100,000.

Finally, Williamson notes that “at current levels, the August PMIs are indicating annualized GDP growth of 1.0%, putting the economy on course for growth of just below 1.5% in the third quarter.

Such weak readings hint at downside risks to current third quarter growth projections, which generally point to an expansion of just over 2%."


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