econintersect .com

FREE NEWSLETTER: Econintersect sends a nightly newsletter highlighting news events of the day, and providing a summary of new articles posted on the website. Econintersect will not sell or pass your email address to others per our privacy policy. You can cancel this subscription at any time by selecting the unsubscribing link in the footer of each email.

posted on 04 October 2017

September 2017 ISM and Markit Services Remain In Expansion

Written by Steven Hansen

The ISM non-manufacturing (aka ISM Services) index continues its growth cycle and improved. Markit PMI Services Index slightly declined but remains in expansion.

Analyst Opinion of the ISM and Markit Services Survey

Both services surveys are in expansion. The real question is why did employment come in so poorly the last two months from ADP? Did reality separate from these survey's?

From Bloomberg / Econoday:

Consensus Range Consensus Actual
Markit Services 55.1 to 56.3 55.1 55.3
ISM Services 54.0 to 56.2 55.4 59.8

From Markit:

Service sector business activity growth remains strong in September

  • PMI signals robust expansion in business activity
  • Upturn in new business remains steep despite easing since August
  • Inflationary pressures intensify
  • September survey data signalled a further rise in business activity across the US service sector. Although the rate of growth eased slightly compared with August, upturns in both activity and inflows of new work were strong compared to the average seen over the past two years. Sustained growth of output and new orders supported solid increases in staffing levels. Additional payroll numbers helped to alleviate capacity pressures.
  • Meanwhile, inflationary pressures continued to intensify. Input price inflation was the fastest since June 2015, and charge inflation accelerated to the quickest in three years. The seasonally adjusted IHS Markit U.S. Services Business Activity Index registered 55.3 in September, down slightly from 56.0 in August. This indicated a strong end to the third quarter, and the fastest average quarterly growth so far this year. A number of survey respondents linked the rise in business activity to strong client demand in domestic markets.


From the ISM Services report:

Economic activity in the non-manufacturing sector grew in September for the 93rd consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: "The NMI® registered 59.8 percent, which is 4.5 percentage points higher than the August reading of 55.3 percent. This represents continued growth in the non-manufacturing sector at a faster rate. This is the highest reading since August 2005 when the index registered 61.3 percent. The Non-Manufacturing Business Activity Index increased to 61.3 percent, 3.8 percentage points higher than the August reading of 57.5 percent, reflecting growth for the 98th consecutive month, at a faster rate in September. The New Orders Index registered 63 percent, 5.9 percentage points higher than the reading of 57.1 percent in August. The Employment Index increased 0.6 percentage point in September to 56.8 percent from the August reading of 56.2 percent. The Prices Index increased substantially by 8.4 percentage points from the August reading of 57.9 percent to 66.3 percent, indicating prices increased in September for the fourth consecutive month. This is the highest reading since February 2012 when the index registered 67.6 percent. According to the NMI®, 15 non-manufacturing industries reported growth. The non-manufacturing sector has reflected strong growth in the month of September despite the impact on the supply chain from the recent hurricanes. Respondents' comments indicate a good outlook for business conditions."


The 15 non-manufacturing industries reporting growth in September — listed in order — are: Retail Trade; Other Services; Management of Companies & Support Services; Information; Utilities; Transportation & Warehousing; Real Estate, Rental & Leasing; Wholesale Trade; Construction; Professional, Scientific & Technical Services; Finance & Insurance; Health Care & Social Assistance; Public Administration; Educational Services; and Accommodation & Food Services. The two industries reporting contraction in September are: Arts, Entertainment & Recreation; and Mining.

There are two sub-indexes in the ISM Services which have good correlations to the economy - the Business Activity Index and the New Orders Index - both have good track records in spotting an incipient recession - both remaining in territories associated with expansion.

This index and its associated sub-indices are fairly volatile.

The Business Activity sub-index improved 3.8 points and now is at 61.3.

ISM Services - Business Activity Sub-Index

The New Orders Index improved 2.0 and is currently at 57.1.

The complete ISM manufacturing and non-manufacturing survey table is below.

z pmiservices.png

Econintersect does give serious consideration to this survey as the service sector accounts for 80% of the economy and 90% of employment. However, this an opinion survey and is not hard data.

Caveats on the use of ISM Non-Manufacturing Index:

This is a survey, a quantification of opinion. However, as pointed out above, certain elements of this survey have good to excellent correlation to the economy for as long as it has been in existence. Surveys lead hard data by weeks to months, and can provide early insight into changing conditions.

The main ISM non-manufacturing index (NMI) is so new that it does not have enough data history to have reliable certainty about how it correlates to the economy. Again, two sub-indices (business activity and new orders) do have good correlation for the limited history available.

No survey is accurate in projecting employment - and the ISM Non-Manufacturing Employment Index is no exception. Although there are some general correlation in trends if you stand far enough back from this graph, month-to-month movements have not correlated well with the BLS Service Sector Employment data.

>>>>> Scroll down to view and make comments <<<<<<

Permanent link to most recent post on this topic

Click here for Historical Releases Listing

Make a Comment

Econintersect wants your comments, data and opinion on the articles posted. You can also comment using Facebook directly using he comment block below.

Econintersect Economic Releases

Print this page or create a PDF file of this page
Print Friendly and PDF

The growing use of ad blocking software is creating a shortfall in covering our fixed expenses. Please consider a donation to Econintersect to allow continuing output of quality and balanced financial and economic news and analysis.

Keep up with economic news using our dynamic economic newspapers with the largest international coverage on the internet
Asia / Pacific
Middle East / Africa
USA Government

 navigate econintersect .com


Analysis Blog
News Blog
Investing Blog
Opinion Blog
Precious Metals Blog
Markets Blog
Video of the Day


Asia / Pacific
Middle East / Africa
USA Government

RSS Feeds / Social Media

Combined Econintersect Feed

Free Newsletter

Marketplace - Books & More

Economic Forecast

Content Contribution



  Top Economics Site Contributor TalkMarkets Contributor Finance Blogs Free PageRank Checker Active Search Results Google+

This Web Page by Steven Hansen ---- Copyright 2010 - 2018 Econintersect LLC - all rights reserved