The ISM Non-manufacturing PMI disappointed in February, falling to 53.4 overall. As with all PMI’s, the number isn’t so important as the trend. This index PMI had stood at 60 during the August turmoil (July reading) and still 59 as late as the update for October. From that economists assumed the manufacturing recession would somehow be isolated from everything else; as if US consumers no longer buying goods would indicate such idiosyncratic economic favor. It never made sense to begin with, and now a slew of “services” data is rushing to confirm the irrational nature of the theory. If consumers are so bothered as to stop buying goods (at the margins) then the only difference to anything else would be time.

The U.S. economy’s service sector expanded in February but at a slightly slower pace than the previous month and employment in the sector declined for the first time in two years, according to an industry report released on Thursday.

That last might be the most important point, just ahead of the latest “Payroll Friday” no less. PMI’s aren’t the best gauge but they can be important in terms of confirming interpretations of other data points – including the payroll reports. The BLS still suggests that manufacturing employment is positive despite the all-but-declared manufacturing recession, and I have little doubt that tomorrow’s report won’t be much phased in the service sector, either.

This despite not just the ISM at 53.4, but the Markit Services PMI for February coming out actually below 50; and not just under 50 but with all the important subcomponents suggesting serious and broad weakening (trends).

“Business activity stagnated in February as malaise spread from the manufacturing sector to services. The Markit PMIs are signalling [sic] a stagnation of the economy in February, suggesting growth has deteriorated further since late last year.


Prices pressures are waning again in line with faltering demand. Average prices charged for goods and services are dropping once again, down for the first time in five months, as firms compete to win new business


Worse may be to come, as inflows of new business have slowed sharply, causing backlogs of work across both sectors to fall at the fastest rate seen since the 2008-9 financial crisis. Such weak demand suggests that business activity and price discounting look set to continue.

It wasn’t just the US, of course, as PMI’s everywhere are decidedly concerning. This isn’t, however, “unexpected” but rather more confirmation of the global recession danger which can only include US consumers, if not originating from them in the first place.

The U.S. service sector contracted for the first time since October 2013, euro zone businesses had their worst month in over a year, and China’s service sector growth slowed.


Thursday’s downbeat surveys come just days after reports showed manufacturing output across much of Asia shrank in February and faded throughout Europe and the Americas.

Part of the answer is as suggested yesterday on “full employment” now as compared to prior lows for the unemployment rate – bifurcation and attrition as the background setting this entire “cycle.” It increasingly appears that though the recovery was weak to non-existent, it has still run out steam and whatever small momentum “stimulus” might have temporarily added has been surpassed by something like economic gravity (the intermediate deleterious effects of “stimulus” as attrition have now overtaken whatever short run positives that might have resulted). The agent of that process is the “dollar.”

The global nature again suggests shrinking money through eurodollar banks and conduits that are still steadily retreating. A financialized economy cannot grow without growing finance, whatever any other positives might otherwise exist. In terms of trying to estimate where we are in that process, the fact that manufacturing went first some time ago suggests a first stage, and with services perhaps following now we may already be into the next. That would mean not just a slowdown that won’t stop slowing down, but one that continues to broaden within the overall economy and across geography.