US Markit Services PMI gains in January

FXStreet (London) - At 54.2 in January, the final seasonally adjusted Markit US Services Business Activity Index picked up from 53.3 in December. The index has now registered above the 50.0 no-change threshold for fifteen consecutive months, but the latest reading signalled that the rate of service sector output growth was still much weaker than the peaks seen in mid-2014.

According to Markit, slower new order growth continued to weigh on the performance of the service economy at the start of the year. The rate of new business expansion has weakened in each month since last October, and the latest rise was the least marked in almost five-and-a half years of data collection. Some firms noted that greater caution among clients had led to more subdued sales growth at the start of 2015. Meanwhile, volumes of work-in-hand (but not yet completed) increased only marginally during January, with the rate backlog accumulation easing to the slowest for six months.

Commenting on the PMI data, Chris Williamson, Chief Economist at Markit said: “Markit’s US PMI surveys accurately anticipated the near-halving in the pace of economic growth in the fourth quarter of 2014, and suggest that the rate of expansion remained little better than 2.0 percent annualised at the start of 2015.
“Companies are clearly struggling at the moment, with the surveys recording the smallest increase in new orders seen since the financial crisis six years ago amid weaker US and global economic growth and the strong US dollar.

“However, the survey also found that companies remained in hiring mode, pointing to another robust non-farm payroll gain in January. At the same time, cost pressures hit a post-crisis low due to the oil price rout, which should pave the way for further falls in headline inflation in coming months.

“Irrespective of the employment gain, the combination of lower inflation and slower economic growth suggests that any lifting of interest rates before mid-year is looking increasingly unlikely.”