Weekly Macro Update: ISM Services
Last week’s newsletter covered the ISM Manufacturing index. This week’s newsletter focuses on ISM Services. To understand the figures, an index number above 50 suggests growth in the services sector of the economy, and a number below 50 suggests contraction. Here are the highlights for November:
Economic activity in the services sector grew for the sixth consecutive month.
Supplier deliveries are slowing which is typical as consumer demand picks up and the economy improves.
Prices increased in November at a faster rate than before.
Most commodities were up in price except for diesel, beef, and Personal Protective Equipment.
Source: Institute for Supply Management. Table created by The Macro Mail.
The services PMI numbers for November show slowing but consistent growth across most of the components of the services index. New orders, which tend to lead the services index, remain strong, illustrating confidence in the pace of recovery going forward.
Sector Performance:
Transportation & Warehousing continue to outperform the ISM services index as logistics demand holds up during the pandemic.
Arts, Entertainment & Recreation are being hit hard as a new wave of lockdowns across the US damage business performance.
Source: Institute for Supply Management. Table created by The Macro Mail.
New Orders:
Transportation & Warehousing new orders continue to outperform suggesting that the sector will continue to perform strongly going forward.
New orders for mining exhibited strong growth in November despite the sector as a whole lagging behind. With inflation concerns on the rise, Goldman Sachs is forecasting a structural bull market for commodities in 2021, indicating that mining may outperform in the near future.
Arts, Entertainment & Recreation continue to lag behind. This sector may not see a strong recovery until vaccines are rolled out and lockdowns are lifted.
Source: Institute for Supply Management. Table created by The Macro Mail.
Employment:
Trends in employment are consistent with other parts of the ISM Services Index, with Transportation & Warehousing outperforming and Arts, Entertainment & Recreation lagging behind.
Employment across sectors grew at a faster rate in November than in September and October.
Source: Institute for Supply Management. Table created by The Macro Mail.
Purchasing Manager Comments:
“Conflicting national, regional, and local guidelines/requirements for COVID-19 issues are becoming increasingly difficult to navigate, leading to a lot of just in time (JIT)-type purchases.” - Accommodation & Food Services
“Business is pushing to complete projects due to seasonality in most of our markets. Volume is strong at this point but will gradually slow as temperatures drop in most of the country.” - Construction
“Uncertainty related to the U.S. election is resulting in additional cybersecurity needs.” - Finance & Insurance
“Tough economic conditions. Lost revenues from the COVID-19 crisis are coming back, but not completely.” - Information
“COVID-19 has brought some changes to operations, but for the most part, things are progressing as usual.” - Mining
“Remote working has continued to impact our ability to obtain standard equipment such as iPads, printers and PCs for our stores and employees, who require these items to operate our approximately 800 retail locations. Most items are on a 30 to 60 day back order from our suppliers.” - Retail Trade
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