ISM Services

May 4th, 2016 10:33 am | by John Jansen |

Via TDSecurities:

US: Services ISM Pushes Higher in April

  • In contrast to its manufacturing counterpart, the services ISM index pushed higher to 55.7 in April. The headline gain was reflected in a strong advance in the new orders component as well as in employment.    
  • With all eyes on the transition from a very weak Q1 to the second quarter, this print helps to lean against a slew of weaker data. Maintaining domestic confidence will go a long way to provide the Federal Reserve with proof that growth remains on track despite pockets of external weakness.

The ISM services index bested the market consensus (and our own more pessimistic expectation), rising to 55.7 in April. This performance showed a marked divergence from the manufacturing survey released earlier this week and helps to reinforce the narrative of continued domestic momentum in the US economy. The underlying components were also generally upbeat, with new orders jumping to 59.9 (strongest print since October 2015) and employment rising to 53.0. In a development shared with the manufacturing survey, the prices paid index jumped above the 50 threshold, reaching 53.4 in April.

 

Fears that the domestic backdrop is slowing while there are considerable sources of uncertainty globally resonate at the Federal Reserve. With all eyes on the handoff to Q2 from a very weak first quarter, this print is encouraging insofar as confidence in the service sector remains robust. While the jury remains out as to the growth performance though Q2, a tracking that pushes above 2.0% will keep the Fed on course to hiking once this year. The September meeting remains the most likely candidate.

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