Like the ISM Manufacturing report earlier in the week, today’s release of the ISM Services report also came in weaker than expected, although unlike the ISM Manufacturing report, it remains comfortably in expansion territory. While economists were looking for the headline index to come in at a level of 56.0, the actual reading came in at 55.3, which is the lowest reading since April 2014. On a combined basis, this month’s ISM report dropped from 55.0 down to 54.4. That’s the fourth decline in the last five months and the lowest reading since March 2014. The last time the headline services index declined four times in a five month period was over three years ago in August 2012. Even on a combined basis, economic activity is showing slower momentum.
In terms of the report’s internals, breadth was evenly split between rising and falling components in the services sector. The gains this month came in Export Orders, Inventory Sentiment, New Orders, Employment, and Business Activity. On the downside, the components with the largest declines were Supplier Deliveries and Import Orders. After this month’s changes, three components (Supplier Deliveries, Import Orders and Prices) are contracting, one is neutral (Backlog Orders), and six remain in expansion territory.