Not too hot and certainly not cold is the ISM’s non-manufacturing report for August where the composite index came in at a very solid 55.3. New orders are running a little stronger, at 57.1, with backlog orders building nicely at 53.5. Business activity is very busy at 57.5 and employment strong at 56.2. Delivery times are stable, inventories are on a moderate build and prices are showing welcome pressure. This sample had been running perhaps unsustainably hot through most of the year with the slightly cooler readings for August very favorable. This report, together with this morning’s PMI services, point to a solid and impressive second half for the bulk of the economy.
PMI services for final August posted a very strong 56.0, up 1.3 points from July for the highest result since November last year but still down a sizable 9 tenths from the mid-August flash. But the story of this report is unquestionably about strength with new orders and employment at 2-year highs and business confidence back on the upswing and at its highest level since January. Inflation news is also encouraging, with input costs at a roughly 2-year high and selling prices at a 3-year high. Up until the last couple of reports, strength in this sample had been lagging that of ISM’s non-manufacturing sample whose August results will be posted at 10:00 a.m. ET this morning.