Economic Data Whiffs Across The Board

It was three swings and three misses for US economic data on Tuesday.

Service sector activity expanded in December, but at a slower pace than prior months, according to data from both Markit Economics and the Institute for Supply Management. 

Additionally, factory orders fell 0.7% in November, more than the 0.5% decline that was expected by economists. 

According to Markit Economics, service sector activity slowed to a ten-month low in December, with Markit’s services PMI coming in at 53.3.

Expectations for Markit’s report was for the reading to come in at 53.7, down from November’s 56.2 final reading but just above the flash December reading of 53.6.

ISM’s non-manufacturing PMI, meanwhile, also came in below expectations, coming in at 56.2 against expectations for a 58.0. This was also down from 59.3 in November and was the lowest reading since June’s 56.0. 

Any reading over 50 indicates expansion in the services sector, while readings under 50 indicate contraction. 

Commenting on Markit’s, Chris Williamson at Markit said, “The US economy lost significant growth momentum at the close of the year. Excluding the drop in activity caused by the October 2013 government shutdown, the manufacturing and service sector PMIs collectively signalled the weakest expansion since the end of 2012.”

Williamson also noted that job creation waned into year-end, indicating that monthly payroll growth has slipped “significantly below the 200,000 mark.” The December jobs report is set for release on Friday, with the economy looking to extend its 10-month streak of payroll gains over 200,000, which is the longest streak since 1993-1995. 

Williamson also said that US GDP likely grew at a pace closer to 2% in the fourth quarter, below the 5% pace seen in the third quarter, though Williamson added that, “it’s important to note that growth is merely slowing from an unusually powerful rate rather than stalling.”

Following these reports, Bespoke Investment Group noted that it has been a tough start to the year for economic data:

This data from Markit, ISM, and factory orders comes amid a busy morning for markets, with oil tumbling again and US Treasury yields falling below lows hit late last year.

More to come …

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