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Highlights
The ISM's non-manufacturing index shows little change in month-to-month activity, pointing to fractional but still very welcome growth for the bulk of the nation's businesses. The headline composite index came in at 50.6 vs. 50.9 with the business conditions index, akin to a production index, showing a stronger rate of month-to-month growth, at 55.2 for a 1 tenth gain. The new orders index offers even better news, up 1.4 points to a very solid 55.6. This index, in contrast to the ISM's new orders index on the manufacturing side, is accelerating and will hopefully continue to accelerate in the months ahead. Order backlogs were also higher, up 2 points to 53.5.
Now the bad news. The employment index fell more than 3 points to 41.1 in what is a negative indication for Friday's employment report, and which for the markets, may prove to offset the broad strength of this report. Firms in the sample are not restocking as the inventories index fell 4.5 points to 43.0. Note however that outside of mining and construction, inventories are not a central area of concern for the non-manufacturing sample. Exports are also not a major factor for the sample which however is reporting a month-to-month increase, at 53.5 for a 5 point gain and a reflection of dollar weakness. Delivery times are little changed, at 50.5, while input prices, at 53.0, firmed slightly in the month. Initial reaction to the report is favorable, at least for stocks which are moving higher.
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Market Consensus Before Announcement
The composite index from the ISM non-manufacturing survey finally pushed beyond the breakeven mark of 50, rising to 50.9 in September for a solid 2-1/2 point gain. And we may see further improvement in October as the new orders index rose more than 4 points to 54.2. Also, the backlogs index spiked 10-1/2 points to 51.5 to underscore the strength.
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