 | The ISM non-manufacturing index declined to 52.1 in June |
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| Posted Under: Data Watch • ISM Non-Manufacturing |
Implications: The service sector continued to grow in June but at a slower pace, with the ISM service sector composite coming in at the lowest level since early 2010 and the sub-index for business activity at the lowest level since late 2009. We think the bad financial news coming out of Europe may be holding down the index relative to actual levels of activity, but also note that, at just above 50, the indexes are consistent with other data suggesting real GDP growth of 1% to 1.5% in Q2. Notably, however, the employment index strengthened to 52.3 from 50.8, suggesting service sector firms do not anticipate persistent weakness. It also helps confirm other recent positive data on the labor market (discussed below). On the inflation front, the prices paid index fell to 48.9. This is consistent with other indicators showing a temporary moderation in inflation. However, given the loose stance of monetary policy, we don't expect the lull to last. In other recent news, two good reports on the labor market earlier today. The ADP employment report showed an increase of 176,000 private sector jobs in June, easily beating the consensus expected 100,000. New claims for jobless benefits declined 14,000 to 374,000, the lowest level in six weeks. Continuing claims increased 4,000. These indicators suggest tomorrow's official Labor Department report will show a 120,000 increase in nonfarm payrolls and a 130,000 gain in private payrolls. In other recent news, autos and light trucks were sold at a 14.1 million annual rate in June, better than the consensus expected, up 2.2% from May and up 22% from a year ago. No matter how they answer surveys about how they feel, American consumers are behaving like they're more confident. No sign of a recession in any of these numbers.
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