Remember rule #1 of central planning: when in doubt, baffle with BS. Sure enough, after a very ugly Manufacturing ISM [3]hit the tape two days ago, today we get a big beat out its sister tracker, the Non-manufacturing ISM [4], which printed at 53.7 on expectations of a decline from last month's 52.6 to 52.5, in the process topping the highest Wall Street forecast for the August number. Compounding the 'confounding' is that while the mfg Employment indicator dropped, the non-manfucaturing employment rose from 49.3 to 53.7. Perfectly logical? Exactly. At least there was some symmetry in the Prices Paid indicator, which jumped both here as it did two days ago, from 54.9 to 64.3: the largest component bounce of the August series. And finally, whereas the manufacturing respondents were uniformly bearish, those who rely on services are still full of hopium.
- "Markets and customers we serve remain strong and have not caused any adverse impact to our business." (Management of Companies & Support Services)
- "Economy still stagnant. Small jobs keeping us going. Expect some improvement in capital spending in fourth quarter." (Professional, Scientific & Technical Services)
- "Small slowdown in tourism. Commodity prices on the rise." (Arts, Entertainment & Recreation)
- "Budgets are tighter; there are fewer new purchases being pursued that were not planned or budgeted." (Finance & Insurance)
- "Overall conditions continue to be unpredictable. Sales are inconsistent as customers reel to the news of the day, which creates havoc on the supply chain to respond."(Retail Trade)
- "Customers appear to be refocusing their resources on internal costs and efficiencies." (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 53.7 percent in August, 1.1 percentage points higher than the 52.6 percent registered in July. This indicates continued growth this month at a slighter faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 55.6 percent, which is 1.6 percentage points lower than the 57.2 percent reported in July, reflecting growth for the 37th consecutive month. The New Orders Index decreased by 0.6 percentage point to 53.7 percent. The Employment Index increased by 4.5 percentage points to 53.8 percent, indicating growth in employment after one month of contraction. The Prices Index increased 9.4 percentage points to 64.3 percent, indicating substantially higher month-over-month prices when compared to July. According to the NMI™, 10 non-manufacturing industries reported growth in August. Respondents' comments continue to be mixed, and for the most part reflect uncertainty about business conditions and the economy."
The relevant table:
[5]
Finally, confirming that everything is and has been broken, is the market response: two days ago the Mfg ISM miss sent stocks higher on hopes of more NEW QE. Today's beat sent stocks higher on... well... uhm... virtuous cycle?