There has been a sharp divergence between ISM services and non-services in the US.

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Many of our leading indicators for manufacturing have pointed to weakness. This suggests demand is tilting away from manufacturing and towards the service sector.  The breakdown of the ISM is instructive to see what is driving this divergence.  Pricing power is being better maintained in the services sector, and new orders are also remaining more buoyant in this sector.

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Finally, this phenomenon is not confined to the US. JPM’s global PMI’s are recording the same divergence. This pattern is reminiscent of the recession in 2001 when manufacturing suffered disproportionately and services and consumption remained relatively unaffected.

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Source: Bloomberg, Macrobond and Variant Perception