US Services Surveys Confirm “Baffle ‘Em With Bull$hit” Season Is Back…

After the disaster that was the Manufacturing surveys earlier in the week, the Services surveys are the ‘soft landing’-narrative-believers last great hope ahead of tomorrow’s all-important payrolls print to save the day.

• S&P Global’s Services PMI jumped from its flash print of 55.2 to a final August print of 55.7 (up from the 55.0 in July) – that is the highest since March 2022.

• ISM Services rose from 51.4 to 51.5 (barely beating the 51.4 expectations)

And all that ‘soft’ data improving as ‘hard’ data languishes…

Source: Bloomberg

ISM’s survey saw new orders improve, employment worsen and prices paid rise…

Commenting on the S&P Gloabl data, Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, said:

“An improvement in the headline services PMI to its highest for nearly two-and-a-half years provides further encouraging evidence that the US economy is enjoying robust economic growth in the third quarter, adding to signs of a ‘soft landing’.

So everything’s awesome!? Why cut rates?

“The faster service sector expansion means the PMI surveys are signalling GDP growth of 2-2.5% in the third quarter.

At the same time, the August survey data signaled a further cooling of selling price inflation, notably in the service sector, which has now eased close to the average seen prior to the pandemic and a level consistent with the Fed’s 2% inflation target.

But – it;s a big circular joke…

“Services growth has been buoyed in particular by the prospect of lower interest rates, but there are several headwinds which could dampen growth in the months ahead. Business optimism and investment is being subdued by uncertainty regarding the outcome of the Presidential Election. Hiring is meanwhile being constrained by labor shortages, which also continue to put upward pressure on wages.

So wait – the survey is soaring because people expect rate cuts… which wont happen if the surveys are too strong? Reflexivity, anyone?

“However, perhaps more worryingly, the recent downturn in manufacturing activity is showing some signs of spilling over to the broader economy, notably via stalled orders for industrial services.

“It will therefore be important to monitor whether the service sector succumbs to the recent weakening of factory activity or whether looser monetary policy creates a rising tide to lift all boats.”

As always, baffle ’em with bullshit is back America! What elese would you expect in an election year.