- The Institute for Supply Management (ISM) non-manufacturing index improved to 55.4 in October 2013 to retrace some of the 4.2 point decline to 54.4 in September. Market expectations had been for a slight moderation to 54.0 in the month.
- The “Business activity” and “employment” sub-components both posted strong gains in October, while “new orders” and “supplier deliveries” fell slightly from the previous month.
- The increase in the ISM non-manufacturing index in October retraced some of the unexpected decline in September, which saw the headline reading fall 4.2 points from a near eight-year high in August. This month’s strong reading was particularly encouraging given the 16-day government shutdown that fell during the survey period. As with the ISM manufacturing release last Friday, today’s report defied market expectations for a slowdown, thus providing some initial indications that the negative effect on business sentiment due to the shutdown appears to have been less pronounced than anticipated.
The ISM non-manufacturing index improved by 1.0 points to 55.4 in October 2013, partially retracing the 4.2 point decline in September that brought the index down to 54.4 from its almost eight-year high of 58.6 in August. Market expectations had been for a slight moderation to 54.0 in October.
The overall increase in September reflected solid gains in two of the major sub-components, led by the “business activity” measure jumping to 59.7 in October from 55.1 in September. The “employment” index also posted a strong increase, rebounding to 56.2 in October from 52.7 in September. These gains were partially offset by a slowing in the “new orders” sub-component to a still-strong 56.8 in October from 59.6 in the previous month. The “supplier delivery” measure moderated to 49.0 in October from 50.0 in September, thereby falling below the ‘no-change’ threshold for the first time this year.
The increase in the ISM non-manufacturing index in October retraced some of the unexpected decline in September, which saw the headline reading fall 4.2 points from a near eight-year high of 58.6 in August. This month’s strong reading is particularly encouraging given the 16-day government shutdown that fell during the survey period. As with the ISM manufacturing release last Friday, today’s report defied market expectations for a slowdown, thus providing some initial indications that the negative effect on business sentiment due to the shutdown appears to have been less pronounced than anticipated. The employment index is encouraging for job growth to continue in the month. Our expectation is that Friday’s October payroll employment report will see a gain of 150,000, which would be little changed from the 148,000 increase recorded in September. This month’s strong “business activity” reading points to a solid start to the fourth quarter of 2013, while the “new orders” sub-component, although moderating in the month, continues to indicate a decent pace of activity and is consistent with our call for growth of just over 2% in the final quarter of 2013.
RBC