So much for the summer sugar rush. While last month's Non-manufacturing ISM print, and yesterday's Mfg ISM set the stage for a blowout expectation in today's September Non-Manufacturing ISM update, nobody expected a tumble from 58.6 to 54.4, resulting in the biggest miss in the index since April 2011, the lowest print since June 2013 and even the ISM's Nieves reporting that there has been "significant slowing." To be sure, this follows last month's spike to the highest print of the second Great Depression, but the drop shown below, shows this was all largely a one-time aberration. The leading Business Activity index cratered from 62.2 to 55.1 confirming the August spike was merely an a mirage, but what's worse is that the all important Employment Index (and remember: Services are far more important to the US economy than manufacturing) tumbled from 57.0 to 52.7, the lowest print since May, and biggest one month drop since March 2009!
The full breakdown:
[4]
From the report [5]:
"The NMI™ registered 54.4 percent in September, 4.2 percentage points lower than August's reading of 58.6 percent. This indicates continued growth at a slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased to 55.1 percent, which is 7.1 percentage points lower than the 62.2 percent reported in August, reflecting growth for the 50th consecutive month but at a significantly slower rate. The New Orders Index decreased by 0.9 percentage point to 59.6 percent, and the Employment Index decreased 4.3 percentage points to 52.7 percent, indicating growth in employment for the 14th consecutive month. The Prices Index increased 3.8 percentage points to 57.2 percent, indicating prices increased at a faster rate in September when compared to August. According to the NMI™, 11 non-manufacturing industries reported growth in September. The majority of the respondents' comments continue to be positive; however, there is an increase in the degree of uncertainty regarding the future business climate and the direction of the economy."
The crush in the employment index:
[6]
Finally, the respondents are increasingly seeing no light at the end of the tunnel, especially in construction and retail:
- "Overall business conditions are slowing — small manpower decrease of 5 percent." (Construction)
- "Business levels continue to be strong. Shifting from transient to group travelers." (Accommodation & Food Services)
- "Increased activity following summer vacations, but several postponements as well. Clients still unsure about the economy and business costs (e.g., healthcare)." (Professional, Scientific & Technical Services)
- "Business has leveled off — not much in the way of growth." (Retail Trade)
"Some pick-up in sequential sales growth, but still flat with last year." (Wholesale Trade)
Finally, all those wondering why there was a spike in economic activity in September (and a big drop off currently), this may explain it all:
- "The federal government's spending is increasing greatly as agencies execute their final budgets and utilize fiscal year 2013 appropriated funds prior to their expiration on September 30th. This has caused a major increase in procurement activity for goods and services. Budgets are uncertain for fiscal year 2014, so some items requiring funding in future years are not being purchased." (Public Administration)
Explains it all.