On April 3, I noted a huge discrepancy between the ISM manufacturing report and Markit’s PMI manufacturing report.
Today, both companies gave their assessment of non-manufacturing also known as services.
The discrepancy remains. At least one of the companies is way off base in regards to GDP estimates.
The ISM Non-Manufacturing Report on Business notes business activity increased for the 92nd consecutive month.
Fourteen industries reported increased business activity and two industries reported decreased activity for the month of March. Employment expanded for 37 months.
The Business Activity Index is a robust 58.9 down from 63.6. New Export orders rose.
Following the manufacturing report, the ISM assessed first quarter GDP at a whopping 4.3%. The ISM did not update that forecast today.
Markit U.S. Services PMI
In contrast to ISM, the Markit U.S. Services PMI reports the slowest growth of US service sector for six months.
Latest data also showed input costs rising at a solid rate, although a desire to strengthen profitability meant higher costs were passed onto clients wherever possible. The seasonally adjusted Markit U.S Services Business Activity Index remained above the 50.0 no-change mark in March to extend the current period of growth to 13 months.
However, the index continued to fall from January’s recent peak, reaching a six-month low of 52.8 (February: 53.8).
Operating costs continued to increase during March, with inflation underpinned by rises in labor costs and higher prices for basic materials and food products. The overall increase in input costs was solid and slightly higher than the pace seen in February.
Markit Composite vs GDP
Chris Williamson, Markit Chief Business Economist, Comments
- “The March PMI numbers add to the picture of a relatively modest opening quarter to 2017 for the US economy. The surveys of manufacturing and services are running at levels consistent with GDP expanding by 1.7% in the first quarter.”
- “Growth of business activity appears to have peaked in January, sliding to a six-month low in March.”
- “The loss of momentum is linked to weaker inflows of new work, with the surveys providing some evidence that demand is being dented in part by higher prices.”
- “However, business confidence, although up on February, has failed to regain the levels seen at the start of the year, suggesting a less ebullient mood has developed among companies than seen in the immediate aftermath of the presidential election. ”
- “This lower degree of business optimism has translated into weaker hiring, with the March surveys indicating the smallest net gain in private sector employment since last October.”
Markit pegs GDP at 1.7% and ISM at 4.3 percent noted on April 5 in, Markit PMI vs. ISM Fantasyland GDP Projection: Stagflation Lite?
Both ISM and Markit are diffusion indices of similar companies. The discrepancies, especially the GDP estimates, should not be this wide.
Related Articles
- April 3: GDPNow Bumps First Quarter GDP Estimate to 1.2% Following ISM Report
- March 31: Discrepancy Between GDPNow and Nowcast is Two Percentage Points Once Again
- March 31: Personal Income Up But Real Consumer Spending Declines Second Month
- March 31: Real GDI, GPDI: Recession Warnings?
- March 27: Two Percent Growth as Good as It Gets?
- March 28: More Signs of a Weakening Economy: Imports and Exports Decline, Treasury Yields Fall
I will post my own assessment of first quarter GDP shortly.
Mike “Mish” Shedlock
The Bond market (aka The Smart Money) not buying the stock market’s enthusiasm for today’s numbers.
Excuse you, but Janet Yellen is not “smart money”
Really?
For all the hand wringing that Federal Reserve is/will be insolvent. On December 31st their balance sheet had an unrealized GAIN of $66 billion … and since yields have dropped a bit (bonds higher).
Not too shabby.
page 27
https://www.federalreserve.gov/aboutthefed/files/combinedfinstmt2016.pdf
That’s like claiming you are stock market genius for putting your elderly mom’s entire life savings into faceplant, and as a result of your alleged genius, she is a millionaire (for now anyway).
But in the real world, your genius butt would be charged with violating the prudent investor rules, multiple ERISA laws, breach of fudiciary duty, etc.
The question you chose to ignore is whether Janet Yellen manipulating yields (and killing all price discovery) constitutes any sort of market signal — or does it signify a broken bond market.
Even bullish bond market strategists are saying the price discovery mechanism was wrecked by the Fed’s decade of market manipulation.
FYI, Treasury yields are going lower … a lot lower …. no matter what Federal Reserve does or does not do.
Federal Reserve FOLLOWS the market; does not LEAD.
In the Real World, the FED is both the Law and Above the Law. The FED does what it wants, and gets away with it (no accountability). Also, the FED gets to make the money, making the FED a true money-making machine. As Congress outsources what used to be executive branch government operations to the FED, the FED is becoming more a standalone LAW onto itself like the old East India Company. Witness the Consumer Protection Agency, outsourced to the FED so that even POTUS cannot have a say in what they do. Like the EU, the FED is no doubt hankering for its own army ala the old East India Company. Under the Marxist Party, the FED was on its way to being part of a dual government existing outside of the executive branch.
in the real world, Tony Bennet really doesn’t know what he is talking about. Sometimes I try to correct him, for other reader’s benefit. By himself Tony Bennett is clueless and not worth arguing with
I hope other readers don’t take his nonsense at face value
Adam Price? aka socalbeachdude?
I’ll give you props, though.
At least THIS time you’re not whining for Mish to ban me.
@tony — you already changed your ID twice to keep posting left-wing trash
I assume Mish doesn’t want to chase constantly changing IDs, Soros will just hire another ten Indian click farmers to replace you.
But you are still an idiot and readers here should be very cautious reading your trash
All these fundamentals are just noise. BUY, BUY and BUY because the paper hangers always win………..
Mish’s obsession with GDP forecasts from academics continues… in the real world, business is seriously restrained by excessive debt levels and lack of disposable income (after obamacare theft and debt servicing, not much left). That will be the case until obamacare gets repealed, and debt levels are brought back down to 2007 levels (preferably a lot lower). Lower healthcare COSTS matter. Lower debt levels matter.
Whether some cloistered academic thinks a government statistic will print at 1.1% or 2.1% or 3.1% isn’t going to matter to most US voters.
It would take a statistician on the order of Ronald Fisher to unravel the source of this error. It is indeed error, as both cannot be right. But GDP is a set of arbitrary numbers anyway, and perhaps most noteworthy and most important is that both see the economic numbers as being on the upside (versus a contracting economy). Nevertheless, a fascinating problem.
Still waiting for Mish to even mention the giant elephant in the room: the Obama regime **WAS** illegally spying on Trump during the election — and Susan Rice, the crazy lady that apparently said Benghazi was just a reaction to a youtube video (not Obama shipping qadafi weapons to syrian rebel groups), is now at the forefront of the spying / attempted election tampering scandal.
CNN wants to censor the story from their viewers. Not sure why Mish doesn’t mention it at all. It is going to have massive repercussions no matter how it ends. Maybe Rice, Clapper and Obama go to prison. Maybe their actions are allowed, which implicitly sets precedent that other presidents can use the intelligence services to influence US elections…. either way, a legal precedent of some kind will be set
Ms Rice claims she didn’t unmask the Trump associates on the surveillance and that is correct. She asked someone else to unmask them. It’s all been clever wordplay so far, choreographed by the likes of CNN.
She needs to get a lawyer and get one soon.
So far, CNN has just refused to mention anything about the Rice spying scandal — while other ultra-left wing media outlets reluctantly started running stories.
Scott Adams (the cartoonist, San Francisco resident, and guy who said Trump would win election despite Adams voting hilary) has another post ridiculing the “news” media. One of Adam’s left wing buddies (an ignorant man who only reads NYTimes and only watches CNN) was completely uninformed about Rice’s many crimes. Adams suggested his friend read up on Business Insider (owned by fellow left winger Jeff Bezos), and “suddenly” his friend realized how much CNN was keeping from him.
Rice definitely needs a lawyer, and maybe someone to teach her how to speak properly. But she is going to end up in prison — she clearly broke a lot of laws, and even the unmasking part is doubtful (there was no national security interest at stake).
Obama is going to get indicted in this too — the illegal spying and election manipulation was going on for over a year, its difficult to imagine a scenario where Obama didn’t know about it (also he referred to the spying in a NYTimes quote, so he did know).
Draining the swamp means the entire Chicago-style corruption group has to end up in prison
Again, Adams is probably a bit left wing (he does live just outside San Fransisco and graduated from Berkley)… but here he is pointing out how uninformed CNN viewers are:
http://blog.dilbert.com/post/159226601511/how-a-hypnotist-sees-a-verbal-slip
After pointing out CNN’s censorship, Adams also mentions Ms Rice made a verbal slip and subconsciously admitted to the leaks / breaking the law
Glad we have Mish as an antidote to fake (govm’t) news!