US Services Sector Slumps As Business Outlook Nears 2-Year Lows

US Services dropped modestly from the 58.9 in September to a final print at 57.1 in October – the lowest since April. This should be no surprise as for the last 5 years, H2 has seen a notable decline in the soft-survey-based data. Despite the plunge, employment remained solid even as the business outlook neared 2-year lows. As Markit notes, the survey “warns of a slowdown as move towards the end of the year,” which is odd because the world and his pet rabbit said US was decoupling. For a change ISM Services actually agreed with Markit and printed 57.1, missing by the most since Feb 2014 with New Orders and Prices Paid down.

5 in a row, and lowest since April.

Markit notes:

“The October survey data running at a level consistent with GDP rising at an annualized rate of 2.5% at the start of the fourth quarter.”

“Meanwhile, a solid increase in payroll numbers was maintained during the latest survey period, but service providers’ confidence towards the business outlook was the least positive since July and close to its lowest for two years.”

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And then came ISM Services, missing by the most in 8 months…

But catching down to Markit

The breakdown:

What the cherry-picked respondents are saying:

“Business is steady with new product launches.” (Information)
“The general business outlook is favorable. Approaching 2015 with cautious optimism.” (Finance & Insurance)
“Healthcare market continues to see challenges and uncertainty.” (Health Care & Social Assistance)
“Economy appears to be slowing. Fears of ISIS, Ebola, etc.” (Professional, Scientific & Technical Services)
“It appears that customers are beginning to engage which is producing sales. Not where we want to be, but continuing to see improvement.” (Retail Trade)
“Sales very sporadic. It’s up and down weekly.” (Accommodation & Food Services)
“Business activity remains robust here.” (Utilities)
“The past few months have been record months for us in terms of sales, but we are seeing margin pressure.” (Wholesale Trade)

And keep in mind: all of the above is then “seasonally-adjusted” – here is what the key “New Orders” data looks like unadjusted.

It is at the unadjusted level that we find that the number of respondents seeing “worse” conditions is at the highest since March, offset by those seeing “better”, which in turn is lowest sincethe Polar Vortex.