Just two days after one of the weakest ISM Manufacturing reports in years, Thursday’s release of the ISM Non-Manufacturing report for the month of August was a complete 180 from its Manufacturing counterpart. While economists were expecting the headline index to rise from 53.7 in July up to 54.0, the actual reading was considerably higher at 56.4. While it’s only the highest reading since May, the fact that it increased at all was a surprise to many. On a combined basis and accounting for each sector’s share in the overall economy, the Composite ISM for August rose from 53.4 up to 55.6 for its biggest monthly gain since February.
In terms of the breadth of this month’s report, it wasn’t particularly strong, but it wasn’t bad either. On a m/m basis, just four components increased while six declined. On a y/y basis, though, things were much weaker as just two components (Business Activity and Inventories) were higher this August than last. The biggest gainers on a m/m basis were Business Activity and New Orders, while on the downside Backlog Orders, Inventory Sentiment, and Employment saw the largest declines. In the case of Business Activity, that component’s 8.4 m/m increase was the largest since February 2008. Ahead of Friday’s Non-Farm Payrolls report, though, the decline in the Employment component is especially notable as its level is now the lowest since March 2017. Start a two-week free trial to Bespoke Institutional to access our interactive economic indicators monitor and much more.