US Services Sector Rebounds Despite Slump In Employment

Despite the hope-narrative-crushing drop in Manufacturing data (ISM/PMI), Services data in April (PMI/ISM) showed improvements. Markit PMI rose modestly despite continued input price inflation (21-month highs) and a plunge in employment (to its lowest growth since July 2010). ISM Services also showed employment slip but new orders exploded higher.

ISM Services printed 57.5 – above all 73 economists’ estimates…

With manufacturing plunging, Services apparently rebounded…

Full ISM Breakdown:

• Business activity rose to 62.4 vs 58.9 prior month
• New orders rose to 63.2 vs 58.9
• Employment fell to 51.4 vs 51.6
• Supplier deliveries rose to 53.0 vs 51.5
• Inventory change rose to 52.5 vs 48.5
• Prices paid rose to 57.6 vs 53.5
• Backlog of orders rose to 53.5 vs 53
• New export orders rose to 65.5 vs 62.5
• Imports fell to 53.0 vs 56.5
• Inventory sentiment fell to 60.0 vs 65.0

As miraculously, unadjusted new orders reached a record high…

Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The final services PMI came in above the earlier flash estimate but remained only marginally higher than March’s six-month low.

“Combined with a weak manufacturing PMI reading, the surveys suggest that business activity is growing at a slower pace than seen over the first quarter as a whole.

“However, a robust rise is likely to be seen in second quarter GDP as the official numbers exhibit greater seasonality than the PMI, with consistently weak first quarters being typically followed by a rebound in subsequent periods. For this very reason, GDP data seemed to signal weaker growth than implied by the PMI in the first quarter of 2017.