Remember last night's Decoupling vs. Lag in the US?

Last night I talked about how we are seeing many countries going in to recessionary or contraction, the fact that the US has not entered sub 50 prints has the pundits claiming the US has decoupled with the World economy, however facts seem to point to the US simply following the global stage, just with a lag. That's why this morning's US Services ISM print is so important and such a disappointment to the pundits who advocate the decoupling theory.

In the US, Services account for 70% of GDP, we are much more oriented toward services then manufacturing as that was long ago shipped overseas, so one could reasonably argue that the services ISM is more important in the US then the manufacturing ISM, although that is important as well.

The number came in at a miss:

Released on 12/5/2011 10:00:00 AM For Nov, 2011

Prior Consensus Consensus Range Actual Composite Index - Level 52.9  53.9  51.5  to 54.6  52.0

Non Manufacturing (Services) ISM came in at 52, down from the prior print of 52.9 and missing consensus of what was supposed to be a better print then previous at 53.9. This is the worst print in nearly 2 years and confirming the NFP from Friday as it relate to the employment situation, the Employment sub-index in the ISM came in at 48.9 from a previous of 53.3!  This employment sub index is in contraction as nearly every other metric of employment has hinted.


Other sub-indicies that are in contraction include: Backlog of Orders, Imports and Inventory is sentiment is seen as too high, which falls in line with what Corning had to say last week about LCD flat panel TV sales, which more or less was that suppliers and retailers were jammed with inventory and selling in many cases with no profit margin. You may remember my experience I talked about in buying a Plasma TV on Black Friday.


One of the more damning quotes was in the respondent's survey,

"We currently see no signs of a turnaround. Customers are nervous about the future of their jobs and incomes. Due to this fact, our sales are down and our need to hire more employees is, too." (Accommodation & Food Services)

All in all, this report couldn't be more timely considering what was mentioned here last night regarding the decoupling vs. lag argument, it looks like the facts are pointing to a lag and that s most definitely the worse of the two situations.