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ISM Non Manufacturing: Modest Rebound As Expected

September 6, 2017

Bottom Line: Surveys indicate that business activity in the services, construction, and government sectors of the economy accelerated modestly in August after surprisingly slower growth in July. The surveys indicate that the level of activity increased with acceleration in new orders, increases in order backlogs and acceleration in export orders, and declines in inventories.

The ISM Non-Manufacturing Index ROSE by 1.4 points in August to 55.3%, compared with market expectations for a small increase to 55.6%. The August reading was slightly lower than its average level over the past 12 months. That said, the current level of the index indicates that the economy is growing moderately.

  • New Orders rose by 2.0 points to 57.1%.
  • Order Backlogs increased modestly and Inventories increased modestly.
  • Employment grew by 2.6 points to 56.2%.
  • Prices increased by 2.2 points to 57.9%.

Quotes from Survey Respondents:

  • "Impressive numbers month-over-month, 8 percent more projects and 4 percent higher revenues." (Construction)
  • "Economy is chugging along. Decent crop yields seem to be offsetting poor commodity prices to some extent. Construction abounds." (Finance & Insurance)
  • "Volumes remain about the same. Actual revenue has decreased due to price compression." (Health Care & Social Assistance)
  • "Flat, stable pricing in the oil and gas sector currently has led to a flattening of supply chain activities." (Mining)
  • "The overall animal protein market is stable, except for pork bellies and bacon. A major shortage of raw material has caused prices to spike, with every restaurant and hotel using bacon or pork bellies on their menu. The demand has outstripped supply. This will continue for the next 3 ‒ 6 months. Eggs are at an all-time historical low and [there is] an overabundance of supply." (Accommodation & Food Services)
  • "Still optimistic conditions and attitudes about [the] economy, job and wage growth." (Professional, Scientific & Technical Services)
  • "Seasonally slow period. Preparations for busy quarter well under way." (Retail Trade)
  • "General slight increase in activity. Some stocking up in the market in anticipation of increased sales in the fall months and to cover for recent inventory shortfalls." (Wholesale Trade)

Article by Contingent Macro Advisors