Implications: Like Monday's ISM manufacturing report, today's ISM services index came in below consensus expectations. Sometimes these reports tell us more about sentiment among managers than actual production activity and we think the drumbeat of dour news regarding a potential US default artificially depressed sentiment in July. Now that the debt ceiling issue is cleared up, we expect sentiment to rebound going forward. It's important to notice that despite declining business sentiment that the top-line services index of 52.7 still suggests economic growth. Moreover, the business activity index, which has a stronger correlation with GDP growth than the overall index, rose to 56.1 in July, the highest level since March, from 53.4 in June. On the inflation front, the prices paid index fell to a still elevated 56.6 in July. We don't expect this measure of inflation will move any lower thanks to the Federal Reserve's easy money stance. In other news this morning, the ADP national employment report, a measure of private sector payrolls, increased 114,000 in July. This is consistent with our forecast of private-sector gains of 130,000 for the official report released Friday morning. In other recent news, Americans bought cars and light trucks at a 12.2 million annual rate in July, easily beating the consensus expected 11.8 million pace. Auto sales were up 5.8% in July and also up 5.8% versus a year ago. We expect further gains in August as parts shortages ease.
Click here to view the entire report.
|
|
Posted on Wednesday, August 3, 2011 @ 1:33 PM
|