Non-Manufacturing ISM Soars To 9-Year Highs Months After Hitting 4-Year Lows

Tyler Durden's picture

US Services PMI fell from June's 61.0 level to 60.8 (slightly below the flash print of 61.0 suggesting modest weakness in the latter end of the month) ending a two-month streak of post-weather exuberance as new orders and jobs data slowed, and Markit warns "growth may have peaked." Factory Orders rose 1.1% for the biggest beat in 9 months. ISM Services smashed expectations and surged to Nov 2005 highs (from 4-year lows just 4 months ago - volatile?) with most sub-indices improving except new export orders fell to 4-month lows.

US Services PMI dropped modestly:

 

“While the economy looks set to continue to expand at robust pace in the second half of the year, these summer months may turn out to represent the peaking in the rate of growth.”

 

So just to baffle everyone with endless BS, moments later ISM Services smashed expectations to its highest since Nov 2005 - a few short months after plunging to 4-year lows.

 

The breakdown of components:

From the report, which hopefully had all of its seasonal adjustments input correctly:

The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. "The NMI® registered 58.7 percent in July, 2.7 percentage points higher than the June reading of 56 percent. This represents continued growth in the Non-Manufacturing sector. This month's NMI® is the highest reading for the index since its inception in January 2008. The Non-Manufacturing Business Activity Index increased to 62.4 percent, which is 4.9 percentage points higher than the June reading of 57.5 percent, reflecting growth for the 60th consecutive month at a faster rate. This is the highest reading for the index since February 2011 when the index registered 63.3 percent. The New Orders Index registered 64.9 percent, 3.7 percentage points higher than the reading of 61.2 percent registered in June. This represents the highest reading for the New Orders Index since August 2005 when it registered 65.3 percent. The Employment Index increased 1.6 percentage points to 56 percent from the June reading of 54.4 percent and indicates growth for the fifth consecutive month. The Prices Index decreased 0.3 percentage point from the June reading of 61.2 percent to 60.9 percent, indicating prices increased at a slightly slower rate in July when compared to June. According to the NMI®, 16 non-manufacturing industries reported growth in July. Respondents' comments indicate that stabilization and/or improving market conditions have positively affected the majority of the respective industries and businesses."

Virtually all industries, 16 out of 17, reported they expanded in July. The only contraction was reported in Utilities.

Here is the all important New Orders series, shown unadjusted and seasonally adjusted:

This is what the respondents said:

  • "Conditions are improving." (Construction)
  • "Slight improvement in the economy, but still experiencing delays in client project start-ups. Expecting some improvement in 4th quarter." (Professional, Scientific & Technical Services)
  • "Animal proteins seeing impact of drought, PEDv [Swine virus], thinning of herds and supply and demand issues. Produce pricing is going up due to drought and crop yields." (Accommodation & Food Services)
  • "Second half of the year is looking promising for increased orders versus last year." (Information)
  • "The area continues to benefit from a solid economy bolstered by the tourism and a rebuilding construction sector." (Public Administration)
  • "Business is still very good. Expecting continued growth in the 2nd half of the year." (Retail Trade)
  • "Business has been strong this summer after a late start due to the poor spring weather." (Wholesale Trade)

Unlike in the Manufacturing ISM, here Helium continues to be in short supply.

Finally, Factory Orders...biggest beat in 9 months.

Charts: Bloomberg