Implications: After the August decline, the ISM non-manufacturing index bounced back in September, coming in above the consensus expected increase to 52.0. This is now the ninth consecutive month that the overall index has remained above the critical 50 level, indicating the service sector of the economy is still growing. With a strong increase in equities in September, today's report may have also been influenced by sentiment, as is often the case.
On the inflation front, the prices paid index remains at an elevated level of 60.1, signaling upward price pressure similar to the levels seen earlier this year. With easy money from the Federal Reserve, we expect inflation to accelerate beginning next year.
In other recent news, pending home sales, which are contracts to purchase existing homes, increased 4.3% in August, beating a consensus expected gain of 2.5%. The rise in pending sales suggests an increase in existing home sales in September. Late last week, automakers reported that cars and light trucks were sold at an 11.76 million annual rate in September, beating consensus expectations and the fastest pace since the collapse of Lehman Brothers in September 2008. Look for more gains in the year ahead as worker pay is rising and consumer debts are much lower than a year ago.
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Posted on Tuesday, October 5, 2010 @ 11:51 AM
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