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ISM Non Manufacturing: Bodes Well For Friday's Jobs Report

October 4, 2017
Bottom Line: Surveys indicate that business activity in the services, construction, and government sectors of the economy accelerated sharply in September, as new order growth rose amid hurricane recovery. The employment component of this survey has had strong correlation with the total nonfarm payrolls ex-manufacturing growth in the past. Increasing just slightly, it would suggest the potential for greater job gains than the current 80k consensus for non-farm payrolls in September.

The ISM Non-Manufacturing Index ROSE by 4.5 points in September to 59.8%, compared with market expectations for a small increase to 55.6%. The September reading was modestly higher 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 5.9 points to 63.0%.
  • Order Backlogs increased modestly and Inventories increased modestly.
  • Employment grew by 0.6 points to 56.8% , indicating that upcoming employment report will likely be higher than last month's print.
  • Prices increased by 8.4 points to 66.3%.

Quotes from Survey Respondents:

  • "Hurricane Irma caused a revenue challenge that will take some time to recover from, interrupting business operations in that region and offsetting growth in others." (Accommodation & Food Services)
  • "Our business continues to grow at a good pace." (Health Care & Social Assistance)
  • "General outlook looking up, with sales picking up. That will drive spend and investment." (Information)
  • "Overall, consistent growth in construction/office renovation jobs. Eight percent more jobs and 6 percent more revenue." (Construction)
  • "Positive business trends continue in second half. Business results above plan and higher year-to-year. Forecast above planned results for 2017." (Finance & Insurance)
  • "Business still in a down trend due to lack of capital investment in worldwide mining market." (Mining)
  • "Hurricane Harvey has been a disruption to normal business activity in the oil and gas industry. Refineries and petrochemical plants were shut down due to the storm, as were many offices along the Gulf Coast. Business is just now returning to some sense of normalcy." (Professional, Scientific & Technical Services)
  • "Continued growth; however, slower pace than in past. Expecting some further disruptions due to weather in Texas and Florida." (Retail Trade)