Implications: The service sector accelerated slightly in May, narrowly beating consensus expectations. A small increase in the index is usually not much to get excited about. But, given the awful financial news coming out of Europe, which is creating dour sentiment holding down the index, it's great news that it beat the consensus. The ISM services index has now remained above 50 for 29 straight months signaling continued growth. The business activity index, which has an even stronger correlation with real GDP growth than the overall index, rose to a solid 55.6, nowhere close to recession territory. The employment index fell once again to 50.8, consistent with the slower growth in payrolls we saw in last week's Labor Department report. On the inflation front, the prices paid index fell to 49.8. This is consistent with other indicators showing a temporary moderation in inflation. However, given the loose stance of monetary policy, we don't expect the lull to last. In other recent news, US consumers bought cars and light trucks at a 13.7 million annual rate in May. This was less than the 14.5 million pace the consensus expected and down 4.5% from April. However, it was still up 17.4% from a year ago, when sales were affected by the aftermath of the tsunami in Japan. Medium & heavy trucks were bought at a 391,000 annual rate in May, up 16.4% from April and 25.3% from a year ago. The gain signals continued growth in the business sector.
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Posted on Tuesday, June 5, 2012 @ 10:49 AM
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