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  The ISM Non-Manufacturing Index Declined to 58.6 in September
Posted Under: Data Watch • ISM Non-Manufacturing
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Implications: Like Wednesday's report for the manufacturing sector, today's ISM service sector report suggests growth remained strong in September, but at a slightly slower pace than in August. Even with the dip in September, the three-month average for the index shows the fastest pace of service industry growth in nearly ten years, and the index has been above 50 for a 56th consecutive month (levels above 50 signal expansion; levels below 50 signal contraction.) The business activity index– which has a stronger correlation with economic growth than the overall index – declined 2.1 points in September to a still elevated 62.9, the second highest reading (behind last month) of the past three years. New orders also dipped last month, but remain at a very robust reading of 61.0, suggesting production should continue to pick up in the months ahead. The employment index ticked higher in September to 58.5 from 57.1 in August, the highest reading we have seen since the start of the recovery. As employment continues to expand, expect income growth to boost consumer spending and business revenue, which, in turn, will help support even more job growth in the future. In other words, the growth in the economy is self-sustaining and should remain that way until monetary policy gets tight, which is at least a few years away. On the inflation front, the prices paid index dropped to 55.2 in September from 57.7 in August. No sign of runaway inflation, but given loose monetary policy, we expect this measure to move upward over the coming year. The US economy is not booming overall, but there is no sign at all of a looming recession. Instead, expect a slightly faster Plow Horse over the next couple of years, with real GDP growth close to 3%.

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Posted on Friday, October 3, 2014 @ 11:03 AM • Post Link Print this post Printer Friendly

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