Non-Manufacturing ISM Slips in November

November non-manufacturing ISM fell more than expected to 54.1 (consensus 55) from 55.8 in October. This will be a concern for the Fed as it indicates the service side of the economy is slowing, which has been the strongest sector in recent years and accounts for around 88% of the economy (manufacturing 12%). The non-manufacturing ISM includes much of the housing market including construction and mortgage brokers. This is the lowest reading since last March, when the index briefly dipped to 52.4. Any reading above 50 indicates growth. One bright spot is that this morning's ADP report on payroll growth showed that all of the very strong increase in employment seen in their survey was due to the service sector, with service sector jobs growing 197k in November, and construction employment only falling by 3k jobs during the month.

By category, declines were seen in new orders, employment, new export orders, and imports. Gains were seen in prices paid (+13pts to 76.5), order backlogs, supplier deliveries, and both inventory measures. Only order backlogs and imports were running below 50, indicating outright contraction. Six industries reported decreased activity as opposed to ten which reported increasing activity.