US: Service Sector slowing suggests growth momentum drifting lower - TDS

According to analysts from TDS, the decline in the ISM manufacturing sector to a 2-year low,  points to a dramatic slowing in the sector.

Key Quotes:

“Service sector momentum slowed markedly in May, with the headline ISM non-manufacturing sector index falling to 52.9 from 55.7. This was the lowest print on this indicator since February 2014, and the drop in the headline index was far sharper than the market consensus expectation for a more modest decline to 55.3.”

“Along with the huge falloff in employment growth, the sharp drop in the ISM service sector index suggests that underlying US growth momentum is drifting lower and it will likely bring into question the current expectation for a 2.5% to 3.0% Q2 GDP performance.”

“In effect, this report suggests that the rebound in Q2 GDP might be closer to 2.0%, and it will likely lend further credence to our current base-case for the Fed to remain on hold until the September FOMC meeting.”