ISM services PMI for December, released on Friday, came in below expectations and raised fears of a hard landing for the economy. Wells Fargo analysts predict a recession is looming, but note that this report does not report the start of a recession.
“We report that the services economy joins manufacturing in contraction. The services ISM came in at 49.6 points, down 6.9 points. Pandemic-induced slump aside, this evenly the largest monthly decline since the November 2008 financial crisis.
“The contraction reading on the jobs component appears at odds with the 223,000 workers employers reported adding during December (see this morning’s Nonfarm Payroll release). But the reading below 50 (49.8 ) does not have to imply layoffs, but rather difficulties in finding staff”.
“This is a rather pessimistic report on services activity at the end of 2022. We try not to make any one-month release too heavy, but the rapid deterioration of key components is not good news. In a way, this is the economic direction the Fed is pursuing, to slow down the economy without crushing the job market.”
Source: Fx Street
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