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Home.forex news reportUS August ISM services 51.5 vs 51.1 expected

US August ISM services 51.5 vs 51.1 expected

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  • Business activity index 53.3 versus 54.5 prior
  • Employment 50.2 versus 51.1 prior
  • New orders 53.0 versus 52.4 prior
  • Prices paid 57.3 versus 57.0 prior
  • Supplier deliveries 49.6 versus 47.6 prior
  • Inventories 52.9 versus 49.8 prior
  • Backlog of orders 43.7 versus 50.6 prior
  • New export orders 50.9 versus 58.5 prior
  • Imports 50.3 versus 53.3 prior
  • Inventory sentiment 54.9 versus 63.2 prior

I used to love this indicator but here are three reasons why the ISM services index has become an unreliable indicator . That said, both indicators showed slight improvement in August, so that makes for a stronger signal.

Broadly, there is some weakness evident in manufacturing, rate-sensitive sectors and the bottom quintile of consumers but spending at levels above that appears to be holding up, though consumers do appear to be more-picky on pricing. That looks like a soft landing but it could always deteriorate and that’s what the Beige Book seemed to indicate yesterday.

Comments in the report:

  • “Generally, business is good. However, there are concerns of slowing
    foot traffic at restaurants and other venues where our products are
    sold.” [Agriculture, Forestry, Fishing & Hunting]
  • “Housing market continues to be dampened by higher borrowing costs.
    All segments of the industry are affected. Single-family homes for sale,
    build for rent, and multifamily units are all feeling the effects.”
    [Construction]
  • “Activity is increasing.” [Finance & Insurance]
  • “Business continues to be strong.” [Health Care & Social Assistance]
  • “Overall business is improving.” [Information]
  • “Hiring of employees, contractors and consultants continues to
    decline as companies look to control costs during a period of economic
    and political uncertainty. Employee layoffs continue across a broad
    range of companies and industries.” [Management of Companies &
    Support Services]
  • “Business has slowed, and it is harder than ever to find talent, but
    less jobs available as well.” [Professional, Scientific & Technical
    Services]
  • “Up in business and activity.” [Transportation & Warehousing]
  • “Steady interest rates are impacting investment in nonregulated business silos.” [Utilities]
  • “High food costs are impacting customer demand, and weak sales
    performance has resulted in negative growth overall. Business activity
    is stable, and supplier costs are generally flat.” [Wholesale Trade]

The survey says this corresponds with 0.8% GDP growth and that compares to 2-2.5% in the S&P Global services survey.

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