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Last week we got a surprising figure from the ISM non-Manufacturing survey. As it covers services industries, it represents a far bigger portion of the economy than the Manufacturing survey does. It dipped below 50 last week indicating that the service section of the economy is in contraction. The Manufacturing survey is also below 50 which means that US businesses are saying that output in the economy is declining.
This is in stark contrast to what all other data released in the US is saying. Before reading in too much from this, we can see in the chart below that this has happened once before recently (in December 2022 to be precise). It then rebounded sharply the following month and the economy accelerated rapidly afterwards. What you needed to do back then was wait for another release and that is what we have to do this time. Meanwhile, it has acted as a reminder to the Federal Reserve that there is still potential for a meaningful slowdown in the economy and perhaps it should be easing policy to avoid that.
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