The ISM Services Index declined modestly in September, but at 56.7 sounds still strong
According to the Institute of Supply Management (ISM) report, Non-Manufacturing Purchasing Managers' Index (PMI) (also known as the ISM Services PMI) in September, declined modestly to 56.7 from 56.9 in August, but it is still way better than 56.0 expectations, and still consistent with expansion in the sector.
Detailed numbers show that except for the employment index, which rose to 53.0, most major components of the index declined last month. While employment numbers in the service sector are the best seen in the last six months, in the manufacturing sector, it was declining.
On the other hand, the decline in supplier delivery times and order backlog more explicitly demonstrate that supply chain disruption which has been disturbing the economy is almost gone, which can be good news for faster recovery, in case of any economic slowdown, which seems so real at the moment. We can see this weakness in Business activity and new order numbers, which both declined, even if they remain at levels consistent with a strong pace of activity. These numbers get more noticeable, knowing that traditionally September is one of the slowest months for economic activities, and just month a ago in August, both of these indicators came off their highest readings for the year, and are still running ahead of their prior six-month averages through September.
Anyhow, these numbers after ISM Manufacturing data, tell us that economy gets slower, even if the pace of this slowness is calm. However, if we look at the bigger picture, we cannot expect the US economy to grow, when we can see the recession signs in the UK, EU, Australia, and many other important economies. Therefore, first hours after publishing data, scaring of more tightening policies by the Fed pushed the stocks lower, but later, looking at the bigger picture could convince the investors that with the ongoing situation in the world and while IMF still decreasing its expectations for global economic growth, we cannot count too much on future restrictive policies, and it lifted the prices after earlier falls.
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