Yet another marker that a double-dip looms

Services, the biggest and most important sector, is slowing.

The last of the three CIPS/Markit Purchasing Manager's Index (PMI) indices that are published every month hit the streets this morning. Each month, we get data for construction, manufacturing and services from these surveys, which are much more timely than the official data -- and they have the advantage that they don't get revised. They also have pretty good predictive power. I have already reported here on the horrid data for construction and manufacturing, so the services sector report was going to be vitally important. Not least because services are the biggest and most important sector. Needless to say, the news was appalling.

The services business activity index fell over 4 points to just above 51; its sharpest fall for a decade and the lowest level since the end of last year. The worry is that it is heading much lower into territory suggesting outright contraction. The decline in the index was greater than those seen in the autumn of 2008 (following the collapse of Lehman Brothers) and was surpassed only by the foot-and-mouth related fall of April 2001. With underlying trends in activity and new business weakening, and confidence regarding the future down, a further drop in service sector employment was recorded in August. Respondents noted the non-replacement of leavers or forced redundancies, as they engaged in restructuring or had insufficient work relative to capacity. Unemployment looks likely to rise further.

The combination of data from the three PMIs plotted in the chart makes the prospect that there will be little or no growth during the rest of the year highly likely. The declines in the three PMIs in 2007 predicted what was to come well before the official data, which didn't start to show sharp falls until well into 2008, so the concern is that these drops suggest there are bad things to come. Indeed, the prospects of a double-dip are rising fast.

Chris Williamson, chief economist at Markit, also has concerns that look right.

The PMI surveys collectively pointed to a near-stagnation of economic growth in August, signaling an increased risk that GDP growth in the third quarter could be even weaker than the 0.2 per cent rise seen in the three months to June. Forward-looking indicators also suggest that the economy could weaken further at the end of the quarter, raising the prospect of a slide back into contraction in Q4 -- if not in Q3 -- and will provide ammunition for those seeking a further injection of stimulus into the economy by the Bank of England. The all-sector PMI is at a level which has always triggered interest rate cuts in the past.

This data makes the MPC decision this week a close call: they will leave interest rates untouched as they have every month since March 2009. As a consequence of the recent round of poor data, though -- including stagnation on the jobs front in the United States and an evolving crisis in the eurozone -- the chances the MPC will move to doing more asset purchases (ie QE, at their meeting this week) has risen. These are the sort of circumstances under which a central bank pulls a surprise in order to show the markets that, in contrast to the Chancellor, they are up to the task.

If they don't act at this meeting, it is all but certain they will do so at their October meeting. Adam Posen looks to have been spot on.

David Blanchflower is economics editor of the New Statesman and professor of economics at Dartmouth College, New Hampshire

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I am special and I am worthless: inside the mind of a narcissist

There's been a lot of discussion about narcissists this week. But what does the term actually mean?

Since the rise of Donald Trump, the term “narcissistic” has been cropping up with great regularity in certain sections of the media, including the pages of this journal. I wouldn’t want to comment about an individual I’ve never met, but I thought it would be interesting to look at the troubling psychological health problem of narcissistic personality disorder (NPD).

People with NPD (which is estimated to affect about 1 per cent of the population) have a characteristic set of personality traits. First, they have a deeply held sense of specialness and entitlement. Male NPD sufferers frequently present as highly egotistical, with an unshakeable sense of their superiority and importance; female sufferers commonly present as eternal victims on whom the world repeatedly inflicts terrible injustices. In both cases, the affected person believes he or she is deserving of privileged treatment, and expects it as a right from those around them.

Second, NPD sufferers have little or no capacity for empathy, and usually relate to other people as objects (as opposed to thinking, feeling beings) whose sole function is to meet the narcissist’s need for special treatment and admiration – known as “supply”. In order to recruit supply, NPD sufferers become highly skilled at manipulating people’s perceptions of them, acting out what is called a “false self” – the glittering high achiever, the indefatigable do-gooder, the pitiable victim.

The third characteristic is termed “splitting”, where the world is experienced in terms of two rigid categories – either Good or Bad – with no areas of grey. As long as others are meeting the narcissist’s need for supply, they are Good, and they find themselves idealised and showered with reciprocal positive affirmation – a process called “love-bombing”. However, if someone criticises or questions the narcissist’s false self, that person becomes Bad, and is subjected to implacable hostility.

It is not known for certain what triggers the disorder. There is likely to be a genetic component, but in many cases early life experiences are the primary cause. Narcissism is a natural phase of child development (as the parents of many teenagers will testify) and its persistence as adult NPD frequently reflects chronic trauma during childhood. Paradoxically for a condition that often manifests as apparent egotism, all NPD sufferers have virtually non-existent self-esteem. This may arise from ongoing emotional neglect on the part of parents or caregivers, or from sustained psychological or sexual abuse.

The common factor is a failure in the development of a healthy sense of self-worth. It is likely that narcissism becomes entrenched as a defence against the deep-seated shame associated with these experiences of being unworthy and valueless.

When surrounded by supply, the NPD sufferer can anaesthetise this horrible sense of shame with the waves of positive regard washing over them. Equally, when another person destabilises that supply (by criticising or questioning the narcissist’s false self) this is highly threatening, and the NPD sufferer will go to practically any lengths to prevent a destabiliser adversely influencing other people’s perceptions of the narcissist.

One of the many tragic aspects of NPD is the invariable lack of insight. A narcissist’s experience of the world is essentially: “I am special; some people love me for this, and are Good; some people hate me for it, and are Bad.” If people with NPD do present to health services, it is usually because of the negative impacts Bad people are having on their life, rather than because they are able to recognise that they have a psychological health problem.

Far more commonly, health professionals end up helping those who have had the misfortune to enter into a supply relationship with an NPD sufferer. Narcissism is one of the most frequent factors in intimate partner and child abuse, as well as workplace bullying. The narcissist depends on the positive affirmation of others to neutralise their own sense of unworthiness. They use others to shore themselves up, and lash out at those who threaten this precarious balance. And they leave a trail of damaged people in their wake. 

This article first appeared in the 16 February 2017 issue of the New Statesman, The New Times