ISM Non Manufacturing: Surprise Slump in Expectations for New Order Growth
January 5, 2018
Bottom Line: The new orders component of the survey of Business activity in the services, construction, and government sectors of the economy fell to its lowest level since August '16. While overall the survey indicates that the service sector is still growing moderately with most sectors reporting positive outlooks, the survey noted contraction in tech, educational services and management support services. Overall this report suggests some deceleration in overall growth in the services sector coming into year-end.
The ISM Non-Manufacturing Index FELL by 1.5 points in December to 55.9%, compared with market expectations for a small increase to 57.6%.
The December 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 fell by -4.4 points to 54.3%. Order Backlogs declined modestly and Inventories increased modestly.
Employment grew by 1.0 points to 56.3%.
Prices increased by 0.1 points to 60.8%.
Quotes from the Survey:
- "Many suppliers are proposing price increases, but few are being implemented. Increases in volume and efficiencies seem to be outperforming commodity pricing." (Accommodation & Food Services)
- "December is slowing, as is seasonally expected after a strong fall. Business in general is strong [and] within the normal pattern of seasonal fluctuation." (Management of Companies & Support Services)
- "Some improvement is jobs from the private sector." (Professional, Scientific & Technical Services)
- "Lumber prices are increasing due to product [being] damaged in the recent wildfires. Duties on steel from Vietnam is expected to cause an increase in steel prices. Ongoing shortages in construction related [to] labor continue to be a problem." (Construction)
- "Ending the year with profits and business levels on track. 2018 is projected to be as productive with an optimistic outlook." (Finance & Insurance)
- "IV solutions are still on national manufacturer back order. Hospital gauze back orders are also causing issues in the industry." (Health Care & Social Assistance)
- "We are seeing a resurgence in the business activity of our oil and gas customers, in a positive direction that is impacting our sales." (Other Services)
- "Steady end-of-year demand. Forecasting substantial increase in 2018 activity." (Public Administration)
- "Sales have slowed in food supply after last month’s buildup for the holidays." (Retail Trade)
Article by Contingent Macro Advisors