Slower Expansion in Non-Manufacturing ISM and Markit Services PMI


Business activity growth softened to a 7-month low in Dec. according to Markit. ISM expansion was less than expected.

The Institute for Supply Management reported the ISM Non-Manufacturing Index at a solid 55.9. Economists, expected a rise of 0.2 percentage points to robust 57.6.​

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Markit Services PMI

Unlike the ISM, Markit provides much more commentary on it Services PMI Report.

Key Findings

  • Slower expansion in business activity in December
  • Upturn in new orders remains relatively strong
  • Business confidence slips further to a 15-month low

Service Sector Business Activity

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Markit Composite PMI vs. GDP

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Markit Chief Economist Chris Williamson Comments

  • “The final services and manufacturing PMI surveys collectively signalled faster business activity growth than the earlier flash readings, though still indicated a moderation in the pace of expansion to the weakest since June. A welcome improvement in manufacturing output growth was countered by a slowdown in the comparatively larger services economy.”
  • “However, while moderating, the overall rate of expansion remains relatively robust, with the PMIs running at levels consistent with the economy growing at a solid 2-2.5% annualised rate in the fourth quarter.”
  • “Similarly, hiring, while also slowing slightly at the end of the year, continued to run at a pace indicative of non-farm payrolls up by around 195,000 in December as firms boosted capacity in line with rising demand. Price pressures meanwhile moderated but remained elevated by standards seen over the past three years.”
  • “The US economy therefore ends 2017 with an encouraging scoresheet of steady economic growth, solid hiring and firmer inflationary pressures, supporting the view that interest rates will continue to rise in 2018.”
  • “A note of caution is sounded by a deterioration in optimism about the outlook in the service sector to the joint-weakest in the past 18 months. However, hopefully news of tax cuts and fiscal stimulus in 2018 will help revive business spirits and drive growth higher.”

My Comments

  1. Hurricanes heavily influenced the manufacturing reports, especially autos and chemicals.
  2. The hurricanes also distorted demand for lumber and building supplies, including new home sales.
  3. Finally, hurricanes impacted the jobs reports for four months but that ended with today's report. See December Jobs Up 148K Following ADP 250K "Overheating" Estimate.

Hurricane impacts aside, Williamson is likely near the mark with his estimate of a "solid" 2-2.5% GDP estimate for fourth-quarter GDP.

The payback comes when the artificial boost of hurricanes wears off.

Mike "Mish" Shedlock

Comments (4)
No. 1-4

"Slower expansion in business activity in December
Upturn in new orders remains relatively strong
Business confidence slips further to a 15-month low" All i can make out of it is that it seems like a bumpy ride.


I have news for everyone: the official unemployment rate is a joke. We are no where near full employment. Take a look at the U6, it's much more accurate.


Tony we are not concerned about reality. We are only concerned about fantasy


Indeed. Fantasy data, fantasy profits and fantasy wealth. Rock on, dudes!

Global Economics