Mixed Reading on Service Economy from Non-Manufacturing ISM

ISM non-manufacturing unexpectedly held steady rather than weakening in August. The headline index remained at 55.8 (consensus 54.5). The ISM non-manufacturing index has indicated expansion for 53 straight months. Readings above 50 indicate expansion in the 88% of the economy comprised of service industries.

This data indicates that the housing and financial market turmoil of the past few months are not significantly impacting the underlying economy. The resilience of the data will be watched carefully as most participants anticipate weakening growth for the remainder of the year. Comments from respondents included "cautious but optimistic", "getting mixed messages on the economy", and "Looks like tight credit is slowing business down". As for employment, comments included "reduction in workforce".

New orders rose a substantial 4.2 points to 57, which is close to the highest level of the year. New export orders rose a point, indicating continued foreign demand growth as the dollar has slowly eroded this year. Most other categories showed declines, including employment and prices paid. The backlog of orders fell 3 points to settle right at 50, with real-estate and rental demand leading the decline.

Ten industries showed growth, including real-estate, and five industries indicated slowing including finance and insurance and construction. Most commodity prices were seen as rising except for fuel and lumber goods. Prices paid has remained above 50 for 51 consecutive months indicating that inflation persists.

Date is obtained from a monthly survey of purchasing and supply managers, with participants weighting based on contribution to GDP. The data is never revised, and is considered a leading indicator of the direction and scope of changes in prevailing views.