Latest / Markets with Megan: A Quick Financial Markets Update / Is the Service Sector Slowing? | S2 E009 | 02-05-25

Transcript

Is the Service Sector Slowing? | S2 E009 | 02-05-25 · Markets with Megan: A Quick Financial Markets Update

• 0:00
  Megan Horneman: The service side of the economy may be actually starting to slow down by the data we've seen this morning.
• 0:05
  Megan Horneman: It's Wednesday, February the 5th, and this is Markets with Megan.
• 0:09
  Megan Horneman: This morning we got the ISM Services Index and this measures the activity in the service sector of our economy and we highlight this report because this is where the majority of the money is spent by Americans is in the service sector, not necessarily goods, so this can also be an inflation as well.
• 0:27
  Megan Horneman: If you look at the inflation readings within this report, this can be an inflation indicator because, since Americans spend the most of their money on services, that's where we tend to see that sticky inflation in the service side of the component.
• 0:39
  Megan Horneman: So let's dig into the details because it did disappoint a bit today.
• 0:43
  Megan Horneman: This is a situation where the equities are up, bond yields are down, because this looks like there are some softening in the data which might lead the Fed to be able to cut interest rates this year.
• 0:54
  Megan Horneman: Again, it's one reading and, if we can say one thing in this podcast, it's one month doesn't make a trend, but we do want to highlight it because it has impacts on the market on a regular basis trend, but we do want to highlight it because it has impacts on the market on a regular basis.
• 1:11
  Megan Horneman: So within the report we saw that the ISM, the broad index, actually declined.
• 1:12
  Megan Horneman: It's still in expansion territory but it was only the second decline we've seen in the last seven months.
• 1:15
  Megan Horneman: And when you look at new orders, we saw the components of this.
• 1:19
  Megan Horneman: We saw new orders these actually sorry new orders prices paid and then business activity.
• 1:26
  Megan Horneman: These are the big components that drag the index lower.
• 1:28
  Megan Horneman: Now, prices paid, though that can be looked at as a positive for the Fed.
• 1:33
  Megan Horneman: So prices paid they did decline pretty sharply for the month of January, but remember that's in the back of a big jump we saw in December, so it's not surprising you'll see some moderation in that.
• 1:46
  Megan Horneman: It still is at 60.4 above the 20-year average leading up to the pandemic, which was 58.5.
• 1:53
  Megan Horneman: So the price is paid, component of this.
• 1:55
  Megan Horneman: While it finally looks like it might be going downward, it still is well above the historical average.
• 2:02
  Megan Horneman: So again, good news, not great news.
• 2:04
  Megan Horneman: The markets are celebrating this like this is great news today.
• 2:07
  Megan Horneman: We think the Fed will be watching this Again, it's one report by Friday, when we get the labor market report.
• 2:13
  Megan Horneman: This could be old news at that time.
• 2:15
  Megan Horneman: So the next event we'll have, as we mentioned, will be Friday.
• 2:18
  Megan Horneman: We'll come with the employment report for the month of January and, as always, if you like this podcast, please hit, subscribe, hit that alarm bell, share it with friends, family or colleagues.
• 2:31
  Megan Horneman: And if you want a history of our podcast, you can go to marketswithmegan.
• 2:32
  Megan Horneman: fm.
• 2:32
  Megan Horneman: Thank you.