Markit's services PMI edged lower to 50.6 in October and is now at a
three-year low and barely showing any growth. The report uses the word
"stagnant" to describe growth in new orders and said export demand
dropped further in the month. Backlogs are also down and employment in
the sample decreased at the sharpest rate in 10 years. Price pressures
remained flat and, in an isolated positive and despite all the weakness,
year-ahead expectations improved. The 50.6 result for services together
with the previously released 51.3 score for manufacturing makes for an
October composite index of 50.9, also showing barely any growth.
...meanwhile...
ISM's non-manufacturing sample reports better-than-expected acceleration
in composite activity, at a headline 54.7 for October which is just
above Econoday's consensus range. Business activity (output) and
employment contributed to the gain as did a nearly 2 point rise in new
orders to 55.6 in a gain that reflects, not strength in exports which
were flat, but strength in domestic demand. Despite the rise in new
orders backlogs fell into contraction.
The headline gain probably
overstates the strength of the report as business activity may have
been propped up in the month by the draw down in backlogs, the latter
not a favorable indication for future employment readings. Yet of the 18
industries tracked in the report, 13 did report composite growth led by
agriculture in what is welcome news for a sector that has had an uneven
year. Yet one of the sector's reporting contraction is mining which has
also had an uneven 2019 following two prior years of strength.
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