ISM Services Slumps To 9-Month Lows; Employment Plunges

Following the significant decline in US Manufacturing ‘soft’ survey data (while hard data keeps rising with manufacturing jobs jumping most in years according to ADP), expectations for this morning’s Services Sector PMIs are mixed.

• S&P Global’s US Services PMI jumped from 15 month lows at 51.0 to 54.4 in March

• ISM Services PMI tumbled from 53.5 to 50.8 – its lowest since June 2024

Source: Bloomberg

Under the hood of ISM was not pretty as Employment plunged into contraction (46.2) and New Orders dropped significantly (while Prices Paid saw some respite)…

Source: Bloomberg

Baffle ‘em with bullshit is back…

Chris Williamson, Chief Business Economist at S&P Global Market Intelligence, offered a silver lining after the Manufacturing survey’s slump:

“March saw a welcome rebound in service sector business activity after a weak start to the year, with employment also returning to growth after a decline seen in February. 

However, the rate of expansion remains below that seen throughout the second half of last year. [ZH: but still stronger than the rest of the world.]

Combined with a weak manufacturing reading for March, the survey data point to GDP having risen at an annualized rate of just 1.5% in the first quarter, down sharply from the 2.4% rate seen at the end of last year. 

But, it’s not all unicorns and rainbows:

“The focus turns to whether growth will also trend lower in the second quarter. 

In this respect, we note that some of the improvement in March reflected better weather, after adverse conditions dampened services activity in the first two months of the year at many companies. There’s a suggestion, therefore, that the expansion in March may exaggerate the true underlying growth momentum in the economy.

“This gloomier picture is supported by the PMI’s future activity index, which showed optimism edging lower again in March. 

Business sentiment is now the lowest since the end of 2022 barring only the heightened uncertainty seen ahead of last year’s Presidential election. 

“Companies report heightened concerns and uncertainty around the impact of political change, ranging from DOGE-related budget cutting to tariffs and the degree to which foreign demand may be affected by recent policy initiatives. 

Concerns have also risen in relation to costs, which rose in March at the fastest rate in nearly two years as firms across both services and manufacturing reported intensifying supplier-driven price hikes, fueled by tariffs.”

While less dramatic than the signal from Manufacturing suirveys, there is still the stench of stagflation as prices are soaring and growth is flagging.