What's going on?
One of the earliest indicators of economic activity are surveys of companies who are asked about their perception of the current business climate versus the prior month. On Thursday, survey results of “services” companies around the world were released (services are things like insurance, healthcare and entertainment).
What does this mean?
Bad news first. We’ve been hearing that China is transforming its economy from one dependent on building stuff (e.g. manufacturing) to one selling stuff (e.g. services). Well, service activity fell significantly in February versus January. It’s still growing, but by a lot less (according to these surveys at least).
Europe’s data was also pretty weak. It suggests that the recovery, which wasn’t exactly soaring to begin with, has lost momentum. (Read our European story)
The US came out as the (relative) winner. There had been fears that the slowing manufacturing sector would feed into weakness in services. Services did slow versus January, but not as much as expected – and they’re still growing at a decent clip. (Read our US story)
Why should I care?
For markets: The narrative seems to have totally changed in the past 3 weeks. It wasn’t long ago that market chatter was filled with fears that America’s economy might be shrinking. That fear increasingly looks misplaced and stocks have rebounded sharply: US stocks are up almost 10% since their low 3 weeks ago. And if you wonder why we keep highlighting the US economy/markets over other regions, you might note that it’s helped drive stocks higher globally (although, it’s not the only reason).
For you personally: If you’re like most of our readers, you work in a “service” industry – so pay attention! Americans, you should note that the one negative part of the report was employment prospects. Let’s hope that’s a temporary blip (we’ll learn more about this when jobs data is released tomorrow). The good news for Europeans is that, despite an economy that appears to be losing its momentum, people are still getting hired: unemployment just hit its lowest level since 2011.