For the first time in 27 months, the Markit Services PMI went into contraction. This is yet another signal the US economy is on the verge of recession if not in recession. I believe the latter.
Markit U.S. Services PMI™ – Final Data (with Composite PMI™)
Key Points
Weakest service sector performance for almost two-and-a-half years
New business and employment growth sustained in February
Business confidence slips to its lowest since August 2010Markit U.S. Services PMI Business Activity Index
Adjusted for seasonal influences, the final Markit U.S. Services Business Activity Index registered 49.7 in February, down from 53.2 in January and below the neutral 50.0 value for the first time in almost two-and-a-half years. As a result, the latest reading indicated the weakest service sector performance the government shutdown disrupted business activity in October 2013.
The seasonally adjusted final Markit U.S. Composite PMI™ Output Index posted 50.0 in February, thereby signalled that private sector output was unchanged over the month. Moreover, the index was down from 53.2 in January and the weakest recorded since October 2013.
Comment
Commenting on the PMI 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.”
Composite PMI
With the exception of the protracted budget battle in Congress, the last time the composite PMI went into contraction, the US was headed into recession.
Mike “Mish” Shedlock
I cut my own hair. I pump my own gas. I self insure. Female service is a different story. You noticed I am cutting back.
Business Cycle OVER
Maybe, but there is still too much slack in labor availability for a significant recession. Maybe a pull back for a couple of quarters, then back to low growth. Japanification.
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Between 1990 and 2002 10,000 manufacturing left for Mexico and Asia from our city of 150,000.
Now my dentist is slow and my barber declared bankruptcy two years ago.
People working part time or temp jobs with no benefits and the Obamacare tax, tend to put off purchases of services… for some reason.
The longer term chart shows the effect of the 3.4 year cycle. The last one started out of the 2008-9 recession lows and ended at the 2012 lows. The present cycle has peaked and is heading down. These cycles were just as active/prominent in the stock markets.
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