Non-Manufacturing ISM Follows Manufacturing Surge Higher: Biggest One Month Move Since April 2009

Just like the incredulous surge in last week's Manufacturing ISM which exploded higher from 50.9 to 55.4 (as we predicted following the Chicago PMI plunge hours before that), so today its non-manufacturing cousin soared in a desperate attempt to give the "all clear" on the US second half economy (at least until the inevitable hangover of course): at 56.0, up from 52.2, and smashing expectations of 53.1 (supposedly the weather was neither too hot nor too cold this time), this was the biggest beat of expectations since January 2012, pushing the index to the highest since February 2011 (when as we now know GDP was negative) and the biggest sequential jump since April 2009. Those part-time workers must really be putting their shoulder into it even though the employment index actually declined from 54.7 to 53.2. New orders soared although at the expense of Backlogs which dropped sharply into contraction mode: pulling activity forward again to telegraph momentum? Long story short - until reality returns and the surge in various global PMIs is moderated, as happened in 2012 and 2011 before it - the Taper once again appears to be on. We expect the September number to plunge just to keep the Baffle with BS theme going strong.

ISM relative to expectations:

And relative to historical:

The full subcomponent index breakdown:

From the report:

The report was issued today by Anthony Nieves, chair of the Institute for Supply Management Non-Manufacturing Business Survey Committee. "The NMI™ registered 56 percent in July, 3.8 percentage points higher than the 52.2 percent registered in June. This indicates continued growth at a faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased substantially to 60.4 percent, which is 8.7 percentage points higher than the 51.7 percent reported in June, reflecting growth for the 48th consecutive month. The New Orders Index increased significantly by 6.9 percentage points to 57.7 percent, and the Employment Index decreased 1.5 percentage points to 53.2 percent, indicating growth in employment for the 12th consecutive month. The Prices Index increased 7.6 percentage points to 60.1 percent, indicating prices increased at a significantly faster rate in July when compared to June. According to the NMI™, 16 non-manufacturing industries reported growth in July. Respondents' comments are mostly positive about business conditions and the overall economy."

What the respondents are saying:

  • "The economy seems to be getting stronger with commodity prices increasing." (Information)
  • "Sequestration and healthcare reform causing uncertainty and lower revenues." (Health Care & Social Assistance)
  • "Business orders continue to grow, but at a slow pace. We are seeing growth in areas where we have been flat for many months. Economy seems to be stabilizing in some areas and heating up in others." (Professional, Scientific & Technical Services)
  • "The auto industry continues to be strong, and we expect it to continue throughout 2013." (Retail Trade)
  • "Competitive environment remains challenging." (Accommodation & Food Services)
  • "Local business continues at same pace as last year. Capital investment continues to be positive." (Wholesale Trade)

And the always amusing report on commodity in short supply: Helium, for the second consecutive month. Quite fitting.