Services Sectors Hit Record Lows

Services Sectors Hit Record Lows

almost 4 years ago2 mins

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Data out on Tuesday showed activity in the US’s services industry fell to a new record low in April – but some investment banks are betting their bottom dollar that tomorrow, there’ll be sun 🎶

What does this mean?

Demand at services companies (i.e. non-manufacturing firms) hit record lows last month according to manager surveys, leading to extensive layoffs and a bleak second quarter for the US economy. As much as 70% of the American economy is made up of consumer spending, after all, and 70% of that comes from the services industry.

Source: The Wall Street Journal
Source: The Wall Street Journal

Across the Atlantic, a similar survey showed activity in the UK services industry fell last month to its lowest level since records began 🙈 And given that its economy is even more consumer-driven than the States’, it puts the country on track for economic shrinkage this quarter that could eclipse the drop expected in the US.

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Why should I care?

Rather than wallow in last month’s data, forward-looking investors are more interested in how future months will pan out. Recent reports from Goldman Sachs and Morgan Stanley might’ve come as a nice surprise, then ☀️ Analysts at both banks reckon current data suggests Europe and the US have hit their economic bottoms, and that – after shrinking around 30% this quarter – advanced economies will grow 16% in the third quarter of the year and 13% in the fourth.

If you were trying to time exactly when things will start to get better, analysts might say… well, yesterday 📆 Because with plenty of investors already having bought up stocks during last month’s market rally, you might be too late – especially since those same analysts think coronavirus infection rates could re-accelerate and wipe out the stock market’s recovery. Of course, if not, a return to “normal” – climbing stock prices and all – could be firmly on the horizon…

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