After the slew of weaker activity and survey data in recent weeks, the small rise in the ISM services index in February should provide some reassurance that the floor is not falling from under the economy. Even so, it still leaves a weighted average of the two ISM surveys consistent with GDP growth slowing to about 1%. The usual caveat applies that the surveys have proved to be a poor guide to GDP in recent years but, allied with the rise in the prices paid index, this lends support to our view that the economy is entering a mildly stagflationary phase.
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