- US Services Growth at 9-Month Low
- Price pressures jumped sharply
The ISM Services PMI for the US fell to 55.3 in February from 58.7 in the previous month, well below analysts expectations of 58.7. The reading pointed to the lowest growth in the services sector since a contraction in May, amid winter storms and supply constraints.
ISM Services disappointed, dropping from 58.7 to 55.3. Source: Bloomberg via Zerohedge
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Create account Try a demo Download mobile app Download mobile appA slowdown was seen in supplier deliveries (60.8 vs 57.8), business activity/production (55.5 vs 59.9), new orders (51.9 vs 61.8) and employment (52.7 vs 55.2). Meanwhile, both export orders (57.6 vs 47) and inventories (58.9 vs 49.2) rebounded. However as employment slowed notably and new orders tumbled, price pressures intensified (71.8 vs 64.2) bolstering expectations for faster inflation in the near term.
Measure of prices paid by companies for inputs surged to the highest level in nearly 12-1/2 years. Source: Bloomberg via Zerohedge
Commenting on the latest survey results, Chris Williamson, Chief Business Economist at IHS Markit, said: “A wide variety of costs are rising, however, putting additional pressure on companies across the board. Many materials prices are sharply higher, transport costs are increasing and wage pressures are building as firms struggle to hire suitable staff, resulting in the largest monthly rise in service sector costs since comparable data were first available in 2009.
“Some of these higher costs will inevitably prove transitory as pandemic-related disruptions to supply start to ease, but it remains unclear how long these price pressures will persist for due to uncertainties over the duration of social distancing requirements and the strength of demand over the coming months.”
Today's weak ISM survey (together with today's disappointing ADP report) should temper expectations for an acceleration in job growth in February taking into consideration that most Americans work in the service sector. Given the above, Friday's NFP report may again turn out to be quite a disappointment.
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