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ISM Non Manufacturing: Sharp Rebound, Highest Since Last October

October 5, 2016
Bottom Line: Business activity in the services, construction, and government sectors of the economy accelerated sharply in September, rebounding from an unusually low August. These sectors are growing at a moderate pace. The level of activity has increased with acceleration in new orders, increases in order backlogs and acceleration in export orders, and increases in inventories. Employment accelerated moderately and was its highest level since October of last year when non-farm payrolls were growing at a nearly 300k monthly pace. ISM Non-Manufacturing Employment Index has had strong correlation with the total nonfarm payrolls ex-manufacturing growth in the past. This would suggest an upside bias to current expectations for 174k non-farm payroll growth tomorrow, counter to this morning's ADP print.

The ISM Non-Manufacturing Index ROSE by 5.7 points in September to 57.1%, compared with market expectations for a smaller increase to 53.0%. The September reading was modestly higher than its average level over the past 12 months. The current level of the index indicates that the economy is growing moderately.

New Orders rose by 8.6 points to 60.0%. Order Backlogs increased modestly and. Inventories increased modestly. Employment grew by 6.5 points to 57.2% , indicating that upcoming employment report will likely be higher than last month's print. Prices increased by 2.2 points to 54.0%.