Business activity in the US Services industry accelerated to its fastest since Nov 2015, according to the 'soft' survey data from Markit, but some firms noted that squeezed margins had acted as a brake on employment growth at their business units in January. ISM Services slipped lower with unadjusted new orders tumbling to their lowest since Jan 2016.
The Trump Bump appears to have stalled...
And unadjusted new orders tumbled...
And The ISM Breakdown shows more stagflation...
ISM Respondents are mixed but uncertainty is a theme:
"Demand is relatively flat; down about 2 percent from December to January." (Agriculture, Forestry, Fishing & Hunting)
"Strong second half. Exceeded 2016 revenue and earning targets. Q1 [is] looking strong so far. Cautiously optimistic for 2017." (Finance & Insurance)
"Current conditions stable. Uncertainty with Trump presidency and how it is going to impact health care." (Health Care & Social Assistance)
"The overall outlook from our perspective is that we are seeing an uptick in activities, both in the energy sector and the construction side of our business." (Mining)
"Market conditions are good with lower prices on most animal proteins, grains, and dairy prices. Butter still uncertain with increased demand [for] natural fats." (Accommodation & Food Services)
"A lot of activity to start the year. Companies reassessing their contracts and looking for savings whenever they can get it." (Professional, Scientific & Technical Services)
"The outlook for future business has improved, but there is still a degree of uncertainty regarding how the new administration will execute." (Public Administration)
"Continued optimism concerning the business environment in the near term." (Management of Companies & Support Services)
"Year-over-year for this period, we are down slightly, but that is primarily due to the mild winter we are experiencing. Outlook for upcoming season is very positive." (Wholesale Trade)
Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:
“The US economy has started 2017 on the front foot. Business activity across the economy is growing at the fastest rate for over a year and optimism about the business outlook has risen to the highest for a year and a half.
“The January surveys signal annualized GDP growth of approximately 2.5%, setting the scene for a solid first quarter. With January seeing the largest inflow of new business for 18 months, there’s good reason to believe that firms will be even busier in coming months.
“Even more encouraging is the ongoing impressive rate of job creation, with the January PMI numbers comparable to around 200,000 jobs being added.
“A waning of price pressures takes some heat off the Fed, though the sustained strong output and jobs growth signalled by the surveys will fuel speculation that the next rate hike will be sooner rather than later, with June looking most likely.”
