Diverging services data suggests U.S. coronavirus recovery may be overblown

ISM's stronger-than-expected reading of U.S. services sector data grabbed headlines, but IHS Markit's index told a different story.

Flashback: In December, similar divergence popped up in the two indexes' manufacturing reports, but with ISM's data showing much weaker numbers — the worst manufacturing report in a decade.

• As I wrote then, "One reason for this divergence, highlighted by IHS Markit's chief business economist Chris Williamson in a recent blog, may be that IHS explicitly tells respondents to 'confine their reporting to U.S. facilities/factories.'"
• "ISM data could therefore be more heavily influenced by global conditions facing ... U.S.-owned companies than the IHS Markit data," Williamson writes.

What it means: A similar phenomenon may be happening with the services sector — ISM's gauge may be stronger because multinational companies are seeing improved business overseas and translating that into their responses for the U.S. survey.

The state of play: The JPMorgan Global business survey data (compiled by IHS Markit) showed a record surge of just over 10 index points in May.

• China saw especially strong output growth with the combined manufacturing and service sectors rising at the fastest rate since January 2011, making it the only country on Earth to see its readings in positive territory.