ISM Non Manufacturing: Modest Expansion

January 6, 2016
The ISM Non-Manufacturing Index FELL by 0.6 points in December to 55.3%, its lowest level since April 2014, compared with market expectations for an increase to 56.0%. The December reading was modestly lower than its average level over the past 12 months. That said, this was the 70th consecutive month that the non-manufacturing sector has expanded although the current level of the index indicates that the economy is growing modestly. New Orders rose by 0.7 points to 58.2% as demand expanded for the 71st month. Order Backlogs declined modestly. Inventories fell by 1.5 points to 53%. Employment grew by 0.7 points to 55.7%, indicating that Friday's employment report should be on the moderate side (as ADP this morning suggested too). Prices fell by 0.6 points to 49.7%. Bottom Line: Business activity in the services, construction, and government sectors of the economy decelerated slightly in December but these sectors are still growing at a modest pace. Employment accelerated slightly, confirming today’s moderate gains in ADP 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 modest upside bias to current expectations for 200k non-farm payroll growth on Friday.
Article by contingentmacro