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ISM chart and excerpts below by permission from the Institute for Supply Management® ISM®

Please consider the July 2024 Services ISM^® Report On Business^®

Economic activity in the services sector expanded in July, a trend that has been interrupted only three times — though twice in the last four months — since early in the coronavirus pandemic, say the nation’s purchasing and supply executives in the latest Services ISM^® Report On Business^®. The Services PMI^® registered 51.4 percent, indicating sector expansion for the 47th time in 50 months.

Respondent Comments

• “As was the case in June, restaurant sales and traffic remain flat compared to last year. A heat wave in California, rising gas prices and general angst about menu prices have tempered consumer demand.” [Accommodation & Food Services]
• “Business in 2024 has been steady. The length of our busy season — typically March to mid-June — has extended into mid-July. Volumes have not increased considerably, but the consistency of shipments has been a benefit to our supply chain.” [Agriculture, Forestry, Fishing & Hunting]
• “Business is strong in our industry, water treatment. Prices have been fairly flat, but there’s some pressure from increasing costs.” [Construction]
• “While interest rates on home loans continue to change dramatically at times, the number of members requesting loans has remained relatively steady.” [Finance & Insurance]
• “Inflation markups have been issued from suppliers.” [Health Care & Social Assistance]
• “Business conditions seem to be stable at this time.” [Educational Services]
• “Our main market is the U.S. Due to the election year, new projects are not moving forward as expected. Many of our customers are waiting for the election results to develop new projects.” [Information]
• “High interest rates continue to affect long-term buying decisions.” [Professional, Scientific & Technical Services]
• “Cost of construction services continues to be above predicted budget. Materials deliveries are reliably on time.” [Public Administration]
• “High food costs are having an impact on customer demand and resulting in flat business overall. Business activity stable. Supplier costs also flat in general.” [Wholesale Trade]

Both last month and this month there are a few comments on prices. Note that prizes are up 86 months.

Here is the June Report Again

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Diffusion Index Rebound

Other than prices, I suspect this is an artificial rebound of sorts.

Diffusion indexes only measure direction, not magnitude. For example, a business adding 5 workers will balance out a business laying off 1,000 workers.

New export orders plunged 10.1 points last month now they are up 6.8 points.

Business activity plunges 11.6 points into contraction last month. This month it is up 4.9 points and back in the plus column.

Things only need to be slightly better than to trigger a big rebound the way diffusion index work.

The same applies in reverse, of course.

Did everything only get a tad worse everywhere last month with a sharp rebound this month?

Data suggest that is not the case. Meanwhile, the jobs report was grim, and recession indicators are flying.

Recession Has Started

On July 8, I wrote Weak Data Says a Recession Has Already Started, Let’s Now Discuss When

I’ve seen enough. A recession has started. Let’s discuss starting with a very good indicator that has few false positives and no false negatives.

My follow-up post was on August 2.

August 2: The McKelvey (Sahm) Unemployment Rate Recession Rule Just Triggered

A recession indicator based off rising unemployment triggered in July. Claudia Sahm, a former Fed economist, takes credit for an indicator she did not invent. Let’s discuss.

Weakening data explains the recession call. Yield curve action provides a confirmation signal.

The global selloffs add to recession risks. Sentiment matters.

For discussion, please see Margin Calls Trigger Huge Global Equities and Bitcoin Selloff, Gold Fine

Update: The Nikkei has the biggest 2-day drop in history. Bitcoin is down 7% today and 23 percent in the last week. 18-year high margin positions hitting everything but gold.

Bitcoin has recovered a bit from the 24-hour lows, but is still down about 8.0 percent. Gold is now down about 0.80 percent as of 2024-08-05 9:45 AM Mountain.

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