Weak US sentiment data

“The slide in the Institute for Supply Management’s (ISM) non-manufacturing sentiment survey is a nasty surprise for those who remain convinced the US economy is firing on all cylinders and incapable of tipping back into recession" says Russ Mould, AJ Bell Investment Director.
 
“A reading of 53.5% for January represented a decline from 55.3% in December and comfortably undershot the consensus forecast of 55.1%.
 
“The details behind the headline figure also offered little comfort. New orders fell from 58.9% to 56.5% and the employment indicator from 56.3% to 52.1% and – to fuel markets’ fears of deflation – the prices index tumbled from 51% to 46.4%.
 
“Bulls had argued that softness in the equivalent manufacturing survey would not matter, even though the reading here has sat below 50 for three months and reached six-year lows, asserting that consumer spending and leisure activity would take up the slack regardless.
 
“Yet a study of the long-term history of the two ISM surveys shows that once manufacturing starts to swoon, non-manufacturing always follows in the end (see chart).
 
“This will only add to concerns the US Federal Reserve made a mistake by raising rates in December and that the American economy is losing momentum – and fast.”

Source: Thomson Reuters Datastream

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