Manufacturing slowdown has spread to the services sector

By Akin Oyedele, for Business Insider

Mar 04, 2016

The manufacturing slowdown has spread to the services sector. On Thursday morning, we got two big readings on how the services sector performed during February:

  • Markit Economics' services purchasing manager's index (PMI) showed that sector activity fell for the first time since October 2013. 
  • ISM's non-manufacturing composite held up in expansionary territory, but showed that growth is decelerating.

Markit's PMI was 49.7. It had been expected to print at 50, right on the divide between expansionary and contractionary territory, according to Bloomberg.

In the release, Markit chief economist Chris Williamson wrote, "Business activity stagnated in February as malaise spread from the manufacturing sector to services. The Markit PMIs are signaling a stagnation of the economy in February, suggesting growth has deteriorated further since late last year."

Now to be clear, although the services sector accounts for about two-thirds of economic output, many other indicators are not flashing imminent recession signs. ISM's non-manufacturing composite showed that the services sector continued to grow, although at a slower pace, as only three of 17 industries reported contraction, including mining.

"The majority of the respondents' comments continue to be positive about business conditions," ISM noted. "The respondents are projecting a slight optimism in regards to the overall economy."

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