US Markit PMI Services Hit by Weak Orders

The US Markit PMI services index rose to 51.3 for the final March reading from a flash 51.0 and 50.0 for February and still suggested subdued activity in the dominant services sector.

Despite more favourable headline data, there was a decline in new orders to the weakest level since the data series started October 2009 and business confidence also hit a record low in the survey’s history. The first-quarter deficit overall was the weakest since the third quarter of 2012 and there was further underlying uncertainty which discouraged new business expansion.
More positively from a short-term view, there was a further expansion in employment, although this increase in payrolls at a time of faltering business levels clearly poses important risks. If output and orders fail to expand, there will be strong pressure for increased layoffs later in 2016 and it will be crucial for orders to strengthen during the second quarter if the Fed wants to push ahead with a June rate increase.

Inflation pressures were generally subdued with lower fuel prices helping to offset the impact of higher costs elsewhere. In particular, there was evidence of rising labour costs. The data overall will not create additional pressure for a more hawkish Fed stance.

The ISM non-manufacturing index painted a slightly more optimistic picture with an increase to 54.5 for March from 53.4 previously.

The dollar overall had a slightly firmer tone against European currencies as EUR/USD dipped below 1.1350 with more substantial advance against commodity currencies as USD/JPY held above the key 110.00 level. US bond futures were off their best levels with benchmark 10-year yields just below 1.73%. US equity markets were registering losses of around 0.50%.


Tim is a contributing author to He is an economist and has been involved in financial markets for over 20 years as an analyst. He specialises in global economic trends, macro policy and central banks. Extensive knowledge, experience and data mining is used to anticipate trends in equities, bonds and forex with a contrarian slant. He is a graduate of the University of York with a degree in Economics/Econometrics.