Following yesterday’s disappointment in manufacturing data, Markit’s latest survey confirms the Services industry slowed in July as higher prices are hurting margins and business expectations hit a 6-month lows. Worse still, ISM’s Services survey tumbled with a big miss to its worst since Aug 2017.
Business confidence eased to a six-month low and was subdued in the context of the series history, with some service providers raising concerns surrounding tariffs and their effects on client demand.
Additionally, Market notes that Employment growth eased to a five-month low, with the rise in staffing numbers tempered by difficulties finding suitable candidates for vacancies.
ISM’s Survey breakdown confirms Markit’s view for once with new orders crashing by 6.2pts to 57 – its biggest drop since Aug 2016… and worse still, the stagflationary threat remains as prices paid kept rising despite weaker sales.
As Bloomberg notes, the slump in the gauge of service providers — which accounts for about 90 percent of the economy — is a reminder that U.S. growth will be hard-pressed to sustain the second-quarter pace that was the fastest since 2014.
Commenting on the PMI data, Tim Moore, Associate Director at IHS Markit said:
“US service providers experienced strong growth conditions at the start of the third quarter, with business activity rising at only a slightly softer pace than in June. Strong domestic demand helped to support another improvement in new order levels and a solid expansion of payroll numbers in July.
“However, business expectations across the service economy edged down to a six-month low. Survey respondents cited concerns about rising costs and trade frictions, alongside difficulties sustaining the tempo of new business growth seen in the second quarter of 2018.
”Rising operating expenses continued to place pressure on margins in the service economy, partly reflecting higher wages and fuel bills in July. There were signs that higher input costs have started to shift through to consumers, as service providers recorded the fastest increase in their average prices charged since September 2014.”
At 55.7 in July, the final seasonally adjusted IHS Markit U.S. Composite PMI™ Output Index dipped slightly from 56.2 in June. Despite the rate of expansion easing to a three-month low, it remained strong in the context of the series history…
Maybe the impact of the housing market is starting to hit the surveys…
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