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ISM Services Survey Spikes To 12 Year Highs, PMI Disappoints

Courtesy of ZeroHedge. View original post here.

In the hazy and mixed world of 'soft' survey data, October's prints have been 'different'. Manufacturing PMI surged while ISM Manufacturing dropped and now Services PMI has flatlined but ISM Services surged to its highest since Aug 2005.

As good as it gets?

Take your pick…

Under the hood we see that despite the rise in the headline, new orders dropped as did prices and backlogs.

ISM Respondents noted hurricane impacts…

  • "Increasing commodity pricing along with rising construction cost is a concern in [the] quarter ahead." (Accommodation & Food Services)
  • "Business is strong, driven by large upticks in business from clients in the retail industry. Seasonal surge is starting out stronger than in a normal year." (Management of Companies & Support Services)
  • "The current hurricane damage will result in a shortage of some building materials and draw labor forces away from our area." (Construction)
  • "Positive trends continue. Business activity/results good. Revenue and net profit are above plan." (Finance & Insurance)
  • "We continue to struggle with the ‘unknowns’ around Obamacare, and its impacts on our health care and insurance businesses." (Health Care & Social Assistance)
  • "Business activity with oil companies remains flat. Oil field services, midstream, downstream and petrochemical sectors remain strong." (Professional, Scientific & Technical Services)
  • "Business levels increased due to hurricane recovery efforts." (Real Estate, Rental & Leasing)
  • "Outlook is favorable. Labor is in short supply and is constraining growth." (Wholesale Trade)
  • "Uptick based on replacement vehicle activity in hurricane-impacted areas of Texas and Florida." (Retail Trade)

Commenting on the PMI data, Chris Williamson, Chief Business Economist at IHS Markit said:

“The services PMI survey highlights the dilemma facing the Fed as it seeks to determine the right policy course amid signs of solid growth but soft inflation.

“Together with the manufacturing PMI, which rose higher in October as hurricane-related supply chain disruptions eased, the latest services survey is consistent with underlying growth in the economy of approximately 3%, as well as buoyant jobs growth.

“However, a drop in inflationary pressures adds an element uncertainty to the picture. Having been buoyed by supply chain disruptions in prior months, input cost pressures eased at the start of the fourth quarter, and the rate of increase of average prices charged for goods and services dropped markedly. “While the Fed may likely tilt towards hiking in December on the back of robust economic growth, much may depend on the data flow in coming weeks for signs that stronger growth is feeding through to higher prices.”

Williamson concludes on an optimistic note for Q4…

With the data for October setting the scene for another robust GDP increase in the fourth quarter, a December rate hike is very much on the cards."


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