Following mixed survey data on US Manufacturing, it was even more insanely divergent in September…
Markit US Services PMI dropped to 53.5 – lowest since January (better than expected 53.0 and flash 52.9)
ISM US Services explodes to 61.6 – the highest since August 1997
Markit US Manufacturing rose to 55.6 – highest since May
ISM US Manufacturing dropped to 59.8 – lowest since July
WTF!
Despite the drop in US Services PMI to 8 month lows, they report the pace of job growth at its fastest since June 2014 and prices charged surged to a record high.
ISM Services exploded to its highest since 1997 (2nd highest on record) as Bloomberg notes the reading topped all estimates in Bloomberg’s survey of economists, underscoring continued strength at service companies amid solid consumer demand underpinned by tax cuts and plentiful jobs. While ISM’s headline non-factory index dates to 2008, unofficial calculations based on earlier readings of components show the index is the highest since reaching 62 in August 1997.
The record employment reading is a positive signal before the official U.S. jobs report Friday.
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Gauge of new orders advanced to 61.6 from 60.4
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Measure of export orders rose to a five-month high of 61 while import gauge increased to 55, matching highest since early 2017
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Gauge of supplier deliveries advanced to 57 and prices paid rose to 64.2, both at four-month high
However, commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“Service sector business growth has eased considerably since peaking back in May, but remains relatively solid. Some of the slowdown can be traced to capacity constraints, with new business once again rising at a steeper rate than firms were able to boost output.
“Firms are hiring in increasing numbers to expand capacity, with the employment index from the manufacturing and services surveys rising to a level indicative of a further non-farm payroll rise in excess of 200,000.
“However, despite the increase in employment, many companies are clearly still struggling to meet demand, with strong inflows of new business causing backlogs of work to accumulate across the economy at one of the fastest rates seen since 2014.
“The combination of reduced spare capacity and robust domestic demand is driving prices charged for goods and services higher at a rate not seen since the global financial crisis.”
Wiliamson conclude:
“Combined with the manufacturing results, the September survey adds to signs that the pace of economic growth cooled to the lowest since January but continued to run close to a 3% annualised rate over the third quarter as a whole.
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