Markit Chief Economist "Surveys Point to 2% Fourth Quarter Growth"
Mike Mish Shedlock
The IHS Markit Flash U.S. PMI shows stronger manufacturing performance in December coupled with a service sector growth slowdown.
- Flash U.S. Composite Output Index at 53.0 (54.5 in November). 9-month low.
- Flash U.S. Services Business Activity Index at 52.4 (54.5 in November). 15-month low.
- Flash U.S. Manufacturing PMI at 55.0 (53.9 in November). 11-month high.
- Flash U.S. Manufacturing Output Index at 55.7 (54.5 in November). 11-month high.
December data pointed to divergent trends across the U.S. private sector economy, with a slowdown in services growth more than offsetting a robust and accelerated upturn in manufacturing output. As a result, the seasonally adjusted IHS Markit Flash U.S. Composite PMI Output Index dropped to 53.0 in December, from 54.5 in November.
The latest reading signaled the weakest expansion of private sector business activity since March. Manufacturing production expanded at the fastest pace since January, while service sector output growth eased to a 15-month low.
Chris Williamson, Markit Chief Business Economist Comments
- “The flash PMI surveys brought a mixed bag of news. While manufacturing is ending 2017 with the wind in its sails, the service sector is struggling in the doldrums by comparison.”
- “In manufacturing, faster output and order book growth encouraged firms to add factory workers at the fastest rate for over three years, painting a bright picture of the goods-producing sector expanding capacity in response to resurgent demand.
- “In contrast, service sector activity grew at its weakest rate for over a year, taking job creation to its lowest since May.”
- “Similar divergences were seen in relation to future growth, with business expectations picking up in manufacturing to a near-two-year high but waning markedly in services to the lowest for one and a half years.”
- “With services representing a far greater portion of the economy than manufacturing, the overall picture is therefore one of the manufacturing sector’s exuberance being overshadowed by the gloomier service sector.”
- “Measured overall, the surveys point to the economy growing at a modest annualised rate of just over 2% in the fourth quarter.”
With nearly every analyst upping GDP forecasts in the fourth-quarter and beyond, Chris Williamson provides a sobering outlook.
In addition to Williamson's comments, I suggest the pickup in manufacturing is suspect.
Much of it relates to replenishment of autos, chemicals, and home furnishings damaged in the recent hurricanes.
Mike "Mish" Shedlock