ISM Services: Continued Growth in August

The Institute of Supply Management (ISM) has now released the August Services Purchasing Managers' Index (PMI). The headline Composite Index is at percent 56.9, down 1.2 from 58.1 last month. Today's number came in slightly below the Investing.com forecast of 57.0 percent.

Here is the report summary:

"The Services PMI™ (formerly the Non-Manufacturing NMI^®) registered 56.9 percent, 1.2 percentage points lower than the July reading of 58.1 percent. This reading represents growth in the services sector for the third straight month and the 125th time in the last 127 months, with the exception of April’s and May’s contraction." [Source]

Unlike its much older kin, the ISM Manufacturing Series, there is relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows the Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.

The more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point at 62.4 percent is down 4.8 from a seasonally adjusted 67.2 the previous month.

For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualize the short-term trends.

Theoretically, this indicator should become more useful as the time frame of its coverage expands. Manufacturing may be a more sensitive barometer than Non-Manufacturing activity, but we are increasingly a services-oriented economy, which explains our intention to keep this series on the radar.

Here is a table showing the trend in the underlying components.

(Click on image to enlarge)

Here is a link to our coverage of the latest ISM Manufacturing report.