From the narrative-destroying 49.8 preliminary print for US Services PMI (the lowest since the government shutdown in 2013), today's final February Services PMI printed an even worse 49.7 (below 50.0 expectations) even as stocks have soared in the last 2 weeks. Business confidence tumbles to its lowest since Aug 2010 (record lows). This drops the composite PMI to a dismal 50.0, implying negative GDP growth in Q1. Then ISM Services printed 53.4 (down from January but a small beat) to 2 year lows, confirming the decoupling from manufacturing's demise was a fallacy (merely a lagged response) as the last leg of the economic recovery's stool gets kicked away.
Services Slump into contraction…
Dragging the Composite PMI to 50.0, signaling GDP growth has ended…
And ISM Services contoinued to catch down to manufacturing's weakness…
The ISM Employment subindex tumbled into contraction at 49.7 (lowest since Feb 2014), and New Orders slipped to March 2014 lows.
Commenting on the Services data, Chris Williamson, Chief Economist at Markit said:
“Business activity stagnated in February as malaise spread from the manufacturing sector to services. The Markit PMIs are signalling a stagnation of the economy in February, suggesting growth has deteriorated further since late last year.
“Prices pressures are waning again in line with faltering demand. Average prices charged for goods and services are dropping once again, down for the first time in five months, as firms compete to win new business
“Worse may be to come, as inflows of new business have slowed sharply, causing backlogs of work across both sectors to fall at the fastest rate seen since the 2008-9 financial crisis. Such weak demand suggests that business activity and price discounting look set to continue.
“However, perhaps the brightest warning light is the downturn in business optimism to the joint-lowest recorded by the survey, suggesting firms are bracing themselves for trouble ahead.
“The only positive note in the PMI report is the sustained robust rate of job creation in the services sector, though it seems inevitable that firms will take a more cautious approach to hiring if demand continues to wane in coming months.”
While it does not require some PhD-driven leap of economic logic to the man in the street, it appears it never occurs to analysts that when people lose good paying manufacturing jobs they stop spending on services.
Charts: Bloomberg
via Zero Hedge http://ift.tt/1SkZDMO Tyler Durden