November 2020 ISM And Markit Services Surveys Remain Modestly In Expansion

ISM Services Index


source: tradingeconomics.com

There are two sub-indexes in the ISM Services which have good correlations to the economy - the Business Activity Index and the New Orders Index - both have good track records in spotting an incipient recession.

This index and its associated sub-indices are fairly volatile.

  • The Business Activity sub-index declined 0.7 points and now is at 58.0
  • The New Orders Index declined 1.6 points and is currently at 57.2

The complete ISM manufacturing and non-manufacturing survey table are below.

z pmiservices.png

Econintersect does give serious consideration to this survey as the service sector accounts for 80% of the economy and 90% of employment. However, this an opinion survey and is not hard data.

Caveats on the use of the ISM Non-Manufacturing Index:

This is a survey, a quantification of opinion. However, as pointed out above, certain elements of this survey have good to excellent correlation to the economy for as long as it has been in existence. Surveys lead hard data by weeks to months and can provide early insight into changing conditions.

The main ISM non-manufacturing index (NMI) is so new that it does not have enough data history to have reliable certainty about how it correlates to the economy. Again, two sub-indices (business activity and new orders) do have a good correlation for the limited history available.

No survey is accurate in projecting employment - and the ISM Non-Manufacturing Employment Index is no exception. Although there are some general correlation in trends if you stand far enough back from this graph, month-to-month movements have not correlated well with the BLS Service Sector Employment data.

From Econoday:

The ISM non-manufacturing survey does not compile a composite index like its manufacturing cousin. The business activity index, which is actually akin to the production index in the manufacturing survey, is widely followed as the key figure from this survey.

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