So much for the services savior? The worries about manufacturing weakness spreading are spreading. It’s maddening only because it was entirely predictable, maybe even inevitable. If consumers aren’t buying goods, and they aren’t, it is not because they are otherwise healthy (in financial terms) and have only just recently decided they have in the aggregate accumulated enough stuff. The economy just doesn’t work that way outside of some cartoons.
After both non-manufacturing PMI’s came in much weaker than expected, especially the ISM, the word “spreading” or some variation of it was in every commentary.
Bloomberg:
Service industries expanded in January at the slowest pace in nearly two years, raising the risk that persistent weakness in manufacturing is starting to creep into the rest of the U.S. economy.
The Institute for Supply Management’s non-manufacturing index fell last month to 53.5, the lowest since February 2014, from 55.8, the Tempe, Arizona-based group’s report showed on Wednesday. Readings above 50 signal expansion. The result was less than the 55.1 median forecast in a Bloomberg survey. [emphasis added]
Barron’s:
The worrisome data came from the Institute for Supply Management’s non-manufacturing survey for January, which came in at 53.5 when economists predicted 55.1. Last month the index was at 55.8.
While it is still above 50, which signals expansion, the slip has investors worried that the weakness in manufacturing is spreading. [emphasis added]
The Markit Non-manufacturing PMI was particularly blunt, especially in raising the specter of “cyclical” slowing.
January data highlighted that U.S. service providers started the year with a further slowdown in output and new business growth. At the same time, survey respondents indicated a relatively subdued degree of confidence about their prospects for growth over the next 12 months, with firms linking this to heightened uncertainty about the wider economic outlook…
Reports from survey respondents suggested that softer new business growth was the main factor weighing on service sector output in January. Moreover, a number of firms noted signs of a cyclical slowdown in client demand, driven in part by greater caution about the economic outlook. [emphasis added]
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