The ISM stunners continue. After two days ago we got a manufacturing ISM number which was not cooroborated in any other data points, and which was the biggest beat of expectations in years, we now get the Services ISM, which did a double down on the manufacturing report and rose to 55.1, from 53.7, on expectations of a decline to 53.4. And while the headline number was better than expected, the reason why futures are completely unimpressed is that the Employment index declined from 53.8 to 51.5, refuting any good ADP news, while the stagflationary specter to the economy rose, with Prices spiking from 64.3 to 68.1 - the highest since February, and leading to the biggest 3 month surge in Prices Paid since September 2005. Finally, in terms of Q3 GDP drivers, Inventory which is an input into the GDP bean count declined below 50, meaning Q3 GDP will likely be revised lower yet again, even as Backlogs dropped also to just over 50.
What the respondents are saying - the bullish sentiment here is definitely broader than in the manufacturing ISM where just a third of respondents had anything good to say despite the mysterious uber-beat:
- "Business remains steady — optimistic for good fourth quarter." (Information)
- "Drought is putting pressure on food cost; tourism slowdown over the summer." (Arts, Entertainment & Recreation)
- "Things feel like the economy is moving. More new small business; unemployment declining; stock market up." (Health Care & Social Assistance)
- "Economic outlook is improving, but company is putting a major effort into more cost reductions and reorganization, resulting in more collaboration between procurement and our internal customers." (Professional, Scientific & Technical Services)
- "The general slowdown which began in March showed some reversal in August." (Wholesale Trade)
From the Report:
The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. "The NMI™ registered 55.1 percent in September, 1.4 percentage points higher than the 53.7 percent registered in August. This indicates continued growth this month at a faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 59.9 percent, which is 4.3 percentage points higher than the 55.6 percent reported in August, reflecting growth for the 38th consecutive month. The New Orders Index increased by 4 percentage points to 57.7 percent. The Employment Index decreased by 2.7 percentage points to 51.1 percent, indicating growth in employment for the second consecutive month but at a slower rate. The Prices Index increased 3.8 percentage points to 68.1 percent, indicating higher month-over-month prices when compared to August. According to the NMI™, 12 non-manufacturing industries reported growth in September. Respondents' comments continue to be mixed; however, the majority indicate a slightly more positive perspective on current business conditions."
The 12 non-manufacturing industries reporting growth in September — listed in order — are: Transportation & Warehousing; Retail Trade; Construction; Utilities; Educational Services; Management of Companies & Support Services; Finance & Insurance; Public Administration; Accommodation & Food Services; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Information. The four industries reporting contraction in September are: Mining; Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; and Other Services.
And probably the most expected news of the day from the ISM:
- Helium is the only commodity reported in short supply.