Don't Miss The Forest For The Trees In Conflicting Data
Yahoo | Dec 6, 2022
By Julie Hyman, anchor and correspondent at Yahoo Finance.

Investors rely on a host of different readings to determine where the economy is headed.

So: what happens when two surveys that purport to measure the same thing show diverging results?

Economists try to find a middle ground.

Two different organizations released reports Monday on the services sector of the U.S. economy.

And looked at individually, these reports appear to be capturing two different U.S. economies.

S&P Global's service sector PMI said activity in the sector contracted in November, with its index falling to 46.2, the second-sharpest drop since May 2020. Just minutes later, the Institute for Supply Management came out with its own Services Purchasing Managers' Index, which showed services activity rose in November, to a reading of 56.5 from 54.4.

For both indexes, 50 is the dividing line between expansion and contraction.

Lakshman Achuthan, co-founder of the Economic Cycle Research Institute, also suggested there is one important point of agreement between the two surveys: "Let’s not miss the forest for the trees. The important thing is to recognize that both are in clear downtrends, consistent with a cyclical downturn in overall growth."

Indeed, even the rosier ISM survey has declined seven out of 11 months this year, and at 56.5, is far below the high of 68.4 it reached in November 2021.