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ISM: Services Sector of Economy Still in Expansion Mode, But…

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Economic Update: ISM Non-Manufacturing (Services Sector) Index

The ISM (Institute of Supply Management) Non-Manufacturing index confirmed that the services sector of the U.S. economy remained in expansion mode during December.

However, the headline number disappointed relative to expectations and last month’s levels.

The ISM Non-Manufacturing index was reported at 55.3 in December, which was below the consensus estimate for a reading of 55.8 and below the November reading of 55.9 (Oct: 59.1, Sept: 56.9, Aug: 59.0).

The primary components of the Report showed modest improvement from last month but remain below recent levels.

  • Employment: 55.7 vs. last month: 55.0
  • New Orders: 58.2 vs. last month: 57.5
  • Business Activity: 58.7 vs. last month: 58.2
  • Prices: 49.7 vs. last month 50.3

The takeaway from this and other recent reports is there continues to be a divide between the manufacturing and service sectors of the economy. While most data indicates that the manufacturing sector is struggling, the services sector, which represents the vast majority of the U.S. economy, continues to strengthen.

The ISM Non-Manufacturing index is designed to indicate the state of the services sector in the economy. Readings above 50 are indicative of expansion while below 50 suggests contraction in the sector.

The analysis provided is based on both technical and fundamental research and is provided “as is” without warranty of any kind, either expressed or implied. Although the information contained is derived from sources which are believed to be reliable, they cannot be guaranteed.


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About the Author

David Moenning is the Chief Investment Officer at Sowell Management Services. Dave began his investment career in 1980 and has been an independent money manager since 1987. Thus, Dave has been live on the firing line and investing for a living for more than 29 years.