Services ISM Modestly Beats Expectations, Reports No Commodities Declined In Price

Tyler Durden's picture

In the too little too late department, the ISM just released its Non-Manufacturing report on business, which was probably the first actual economic beat of the last week, coming at 54.6 on expectations of 54.0, up from 52.8 previously. That this was merely a countertrend bounce in what is now a secular decline from the 60 top in Q1 2011 is largely irrelevant, and just like the Mfg ISM which we now expect will drop under 50 in two months or less, the Services ISM will follow suit. For the consumer discretionary bulls out there, we would like to note that of the 18 industries that are reported in the index, only two reported contraction: Educational Services and Retail Trade. Of course, that would be retail for the lower and middle classes. The Tiffany's of the world will certainly not have any such problems until the next GFC.

Some tidbits from the respondents:

  • "Business is O.K. Fuel prices and truck availability are starting
    to be a negative force on our supply chain." (Agriculture, Forestry,
    Fishing & Hunting)
  • "Business conditions are stabilized." (Health Care & Social Assistance)
  • "First and second quarters of 2011 have been up 25 percent over
    2010; however, we expect a slight slowdown over the summer months."
    (Professional, Scientific & Technical Services)
  • "Uncertainty within commodity markets, especially fuel- and
    oil-based products, is putting pressure once again and forcing us to
    retrench as we look for stability. We expect the remainder of 2011 and
    at least the first two quarters of 2012 to be tumultuous." (Retail
    Trade)
  • "Volatile commodity prices adding stress to meat and dairy
    producers; increasing fuel prices are a problem for many." (Wholesale
    Trade)

Odd then that so few respondents are seeing modest commodity price impact when one paragraph down we read the following:

Commodities Up in Price

Adhesives; Air Freight (2); Aircraft Parts; Airfares (6); Aluminum; Beef (2); Can Liners (2); Chemicals; Chemical Products; Coffee; Conveyor Products; Copper (4); Copper Products (6); Copper Wire; Cotton Products (9); #1 Diesel Fuel (8); #2 Diesel Fuel (11); Food Products; Fuel (17); Fuel Products; Fuel Surcharges (5); Gasoline (8); HDPE; LDPE; Latex Gloves (5); Ocean Freight; Oil; Oil Products (2); Packaging Materials (3); Paper (7); Paper Products; Petroleum Products (5); Petroleum Resin Products; Plastics (2); Plastic Products (3); Polyethylene Bags (6); Polyethylene Resins; Rubber Based Products; Steel (6); Steel Pipe and Fittings (2); Steel Products (6); Textiles (2); Transportation Costs (2); and Transportation Services.

Commodities Down in Price

No commodities are reported down in price.

Here is why the market couldn't care less about this data:

And a full breakdown:

ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
MAY 2011
  Non-Manufacturing Manufacturing
Index Series
Index
May
Series
Index
Apr.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
May
Series
Index
Apr.
Percent
Point
Change
NMI/PMI 54.6 52.8 +1.8 Growing Faster 18 53.5 60.4 -6.9
Business Activity/Production 53.6 53.7 -0.1 Growing Slower 22 54.0 63.8 -9.8
New Orders 56.8 52.7 +4.1 Growing Faster 22 51.0 61.7 -10.7
Employment 54.0 51.9 +2.1 Growing Faster 9 58.2 62.7 -4.5
Supplier Deliveries 54.0 53.0 +1.0 Slowing Faster 14 55.7 60.2 -4.5
Inventories 55.0 55.5 -0.5 Growing Slower 4 48.7 53.6 -4.9
Prices 69.6 70.1 -0.5 Increasing Slower 22 76.5 85.5 -9.0
Backlog of Orders 55.0 55.5 -0.5 Growing Slower 5 50.5 61.0 -10.5
New Export Orders 57.0 53.5 +3.5 Growing Faster 9 55.0 62.0 -7.0
Imports 50.5 57.0 -6.5 Growing Slower 2 54.5 55.5 -1.0
Inventory Sentiment 55.0 57.5 -2.5 Too High Slower 168 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 39.5 40.5 -1.0

* Non-Manufacturing ISM Report On Business® data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. Manufacturing ISM Report On Business® data is seasonally adjusted for New Orders, Production, Employment, Supplier Deliveries and Inventories.

** Number of months moving in current direction.