Following on the heels of Tuesday’s better than expected ISM Manufacturing report, the ISM Non-Manufacturing report for December also surpassed expectations this morning, coming in at a level of 57.2 versus consensus expectations for 56.8.  On a combined basis, the ISM for the month of December was 56.9, which was up 0.2 points from November, up two full points from a year ago, and the highest since October 2015.

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Looking at the internals of the report, the strongest component in December was New Orders which jumped to the highest since August 2015.  On the downside, the biggest decliner was Employment, which fell from 58.2 down to 53.8.  While that doesn’t seem to bode too well for Friday’s Employment report, we would note that the component saw a big jump last month that was not reflected in the employment data.  Relative to a year ago, breadth in the internals of the report was mixed, although Prices Paid is up the most of any component.  As shown in the chart below, the downtrend in that component has clearly been broken to the upside.

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