ISM Non Manufacturing: Declines, Suggests Modest Downside Risk for Jobs Report
November 3, 2016
Bottom Line: Business activity in the services, construction, and government sectors of the economy decelerated modestly in October but these sectors are still growing at a modest pace. The level of activity has softened a bit with a modest deceleration in new orders. Employment decelerated moderately, confirming yesterday's moderate gains in the ADP payroll report. ISM Non-Manufacturing Employment Index has had strong correlation with the total nonfarm payrolls ex-manufacturing growth in the past. This would normally suggest a slight downside bias to current expectations for 170k non-farm payroll growth tomorrow, but presents a more mixed picture given recent volatility. The ISM Non-Manufacturing Index FELL by 2.3 points in October to 54.8%, compared with market expectations for a larger decline to 56.0%. The October reading was in line with its average level over the past 12 months. That said, the current level of the index indicates that the economy is growing modestly. New Orders fell by -2.3 points to 57.7%. Order Backlogs held steady but Inventories increased modestly. Employment fell by 4.1 points to 53.1% , indicating that upcoming employment report will likely be lower than last month's print. Prices increased by 2.6 points to 56.6%.
Article by Contingent Macro Advisors