Home Logon FTA Investment Managers Blog Subscribe About Us Contact Us

Search by Ticker, Keyword or CUSIP       
 
 

Blog Home
   Brian Wesbury
Chief Economist
 
Bio
X •  LinkedIn
   Bob Stein
Deputy Chief Economist
Bio
X •  LinkedIn
 
  The ISM Non-Manufacturing Index Dropped to 49.6 in December
Posted Under: Data Watch • Employment • Government • Inflation • ISM Non-Manufacturing • Fed Reserve • Interest Rates • Spending • COVID-19
Supporting Image for Blog Post

 

Implications:  The ISM Services index surprised sharply to the downside for December, now matching the ISM Manufacturing index in contraction (below 50) territory.  Looking at the survey comments, companies cited a general slowdown in orders. That can be seen in the movement from the new orders index, which dropped to 45.2 from 56.0 in November.  The business activity index also dropped a sharp ten points, but remains in expansion territory at 54.7.  While it’s clear that businesses and consumers have been shifting resources away from goods and toward the still re-opening service sector, tighter monetary conditions appear to be finally weighing on the sector that has led the US economy higher in 2022.  We believe the US economy will enter recession sometime in 2023, as the bill for the massive artificial stimulus of 2020-21 comes due.  In terms of the details, the employment index fell back into contraction territory in December.  Comments from employers show that some companies are starting to tighten hiring of new employees due to uncertainty about the strength of the economy in 2023.  One piece of good news from today’s report was the supplier deliveries index fell below 50 for the first time since 2019, signaling shorter wait times.  Finally, the prices paid index declined to a still elevated 67.6.  While that is well below its peak from earlier this year – make no mistake – inflation is still a major problem in the service sector, with fifteen (out of eighteen) industries reporting paying higher prices in December.  We expect the service sector to keep inflation trending well above the Fed’s 2.0% target for some time.  For now, the service sector remains a source of strength in the US economy.  Eventually, the bill will come due for the policy decisions that were made in the last few years. There is no such thing as a free lunch.

Click here for a PDF version

Posted on Friday, January 6, 2023 @ 12:29 PM • Post Link Print this post Printer Friendly

These posts were prepared by First Trust Advisors L.P., and reflect the current opinion of the authors. They are based upon sources and data believed to be accurate and reliable. Opinions and forward looking statements expressed are subject to change without notice. This information does not constitute a solicitation or an offer to buy or sell any security.
 
The information presented is not intended to constitute an investment recommendation for, or advice to, any specific person. By providing this information, First Trust is not undertaking to give advice in any fiduciary capacity within the meaning of ERISA, the Internal Revenue Code or any other regulatory framework. Financial professionals are responsible for evaluating investment risks independently and for exercising independent judgment in determining whether investments are appropriate for their clients.
Follow First Trust:  
First Trust Portfolios L.P.  Member SIPC and FINRA. (Form CRS)   •  First Trust Advisors L.P. (Form CRS)
Home |  Important Legal Information |  Privacy Policy |  California Privacy Policy |  Business Continuity Plan |  FINRA BrokerCheck
Copyright © 2024 All rights reserved.