ISM and PMI Both Show Sharp Non-Manufacturing Gains for September

By Jon C. Ogg Updated Jan 13, 2:46AM EST · Published Oct 5, 11:35AM EDT

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ISM and PMI Both Show Sharp Non-Manufacturing Gains for September — © Thinkstock

Two more readings on the non-manufacturing economy were released on Wednesday. The first was the PMI Services Index, and the second was the ISM Non-Manufacturing Index. Both are fairly fresh reads on the economy as they both measure business activity in September.

The PMI Services Index came in at 52.3 for September, up from 51.0 in August. This reading is from Markit and was up slightly from the 51.9 flash reading previously reported. Note that it was up from the 51.0 in August, and that was also a five-month low. The composite increased, but it showed a slowing in new orders, and hiring was also slow.

Wednesday’s ISM Non-Manufacturing Index is more closely watched than the Markit reading. It showed a stronger jump to 57.1, much more above the consensus estimate of 52.9 and the August reading of 51.4.

ISM’s prior reading showed that activity in the non-manufacturing sector had slowed sharply in August, falling more than four points to what appears to be a cycle-low of 51.4. September’s gains are strong enough on the ISM reading that they should have negated some of the prior weakness in new orders, exports and in the total backlog of orders.

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As for the total 57.1% reading, the breakdown in the index components was as follows:

Business Activity Index at 60.3% (+8.5 points)
New Orders Index at 60.0% (+8.6 points)
Employment Index at 57.2% (+6.5 points)
The Prices Index increased 2.2 percentage points from the August reading of 51.8% to 54.0%, indicating prices increased in September for the sixth consecutive month.
14 non-manufacturing industries reported growth in September.

The ISM report is from more than 375 businesses, and it signaled that respondents are mostly positive about business conditions and the overall economy. Still, the report also points out that a degree of uncertainty does exist due to geopolitical conditions coupled with the upcoming U.S. presidential election.

With these readings both being in the non-manufacturing sectors, it does not offer a total snapshot of the U.S. economy. Still, we are now a post-manufacturing economy, based largely on services and materials.

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About the Author Jon C. Ogg →

Jon Ogg has been a financial news analyst since 1997. Mr. Ogg set up one of the first audio squawk box services for traders called TTN, which he sold in 2003. He has previously worked as a licensed broker to some of the top U.S. and E.U. financial institutions, managed capital, and has raised private capital at the seed and venture stage. He has lived in Copenhagen, Denmark, as well as New York and Chicago, and he now lives in Houston, Texas. Jon received a Bachelor of Business Administration in finance at University of Houston in 1992. a673b.bigscoots-temp.com.