ISM Services Misses - Worst Since January 2010

Expectations for ISM Services (services as in the sector that accounts for 70% of US GDP) were for expansion to keep the decoupling dream alive. Unfortunately, those dreams are dashed for now as the data prints its worst level in 23 months. The biggest driver of this drop was the employment sub-index which cliff-dived from 53.3 to 48.9 (a contracting print). The composite manufacturing and services PMI also dropped notably.

The overall index disappointed - printing at its lowest since January 2010 but the 'double-dip' in the employment index is likely most worrisome.

And the sub-indices show Employment, Backlog of Orders, and Imports all contracting with Inventory Sentiment seen as too high.


"Business activity continues to swing back and forth. Customer traffic remains lower than expected, but discretionary spending is fluctuating, making it difficult to find the pulse of the consumer." (Arts, Entertainment & Recreation)


"Lending is getting a little better. Competition for good deals is fierce because there remains a very limited number of high-quality borrowers." (Finance & Insurance)


"Raw materials prices appear to be stabilizing, and in some cases are dropping. Diesel fuels remain elevated and have not dropped." (Mining)


"We currently see no signs of a turnaround. Customers are nervous about the future of their jobs and incomes. Due to this fact, our sales are down and our need to hire more employees is, too." (Accommodation & Food Services)


"Business is slowly improving. Outlook for the next few months is good." (Retail Trade)


"In the face of an extremely tight business climate, prices continue to be sticky. We are not seeing significant price moderation." (Management of Companies & Support Services)

Chart: Bloomberg