Again, Like We Said

Tuesday we highlighted for you the ISM Manufacturing Survey; pointing out the resoundingly good present situation, and the ongoing concerns around the trade issue. 

This morning’s release of the ISM Non-Manufacturing (services) Survey also echoes the sentiment we expressed in this week’s message

From our summary:

General conditions remain notably positive and, therefore, supportive of growth in equities (financials, industrials and materials in particular) going forward. We, however, see the present setup deteriorating in accelerated fashion if/when it becomes clear that the “trade war” is to be a protracted affair.

In terms of general conditions remaining positive, the ISM Services Index came in at an impressive 58.5; substantially besting the 56.8 consensus estimate.

Here’s the good stuff from this morning’s report:

“The NMI® registered 58.5 percent, which is 2.8 percentage points higher than the July reading of 55.7 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased to 60.7 percent, 4.2 percentage points higher than the July reading of 56.5 percent, reflecting growth for the 109th consecutive month, at a faster rate in August. The New Orders Index registered 60.4 percent, 3.4 percentage points higher than the reading of 57 percent in July. The Employment Index increased 0.6 percentage point in August to 56.7 percent from the July reading of 56.1 percent.

In terms of the setup deteriorating if the “trade war” continues, here’s some not so good stuff:

“Logistics, tariffs and employment resources continue to have an impact on many of the respective industries.”

Here, form the report, is “what respondents are saying”:   emphasis ours…


“Tariff-related cost increases are beginning to accelerate, whether tariffs have been put into effect or not.” (Construction)

“Our business continues to increase, perhaps linked to the general economy and aging baby boomers.” (Health Care & Social Assistance)

“Government tariffs are negatively impacting production and recycling sales. Pulp costs have gone up, and that has directly impacted paper for our newspaper production and copy paper. A 10-percent tariff has been placed on aluminum, [which] is used to make production plates. Those used plates are put on the recycling market, which China has put a tariff on. These dynamics have a significant impact on newspaper margins.” (Information)

“Business for August is surprisingly higher for our company compared to last month and YOY [year over year]. Based on current trends on customer quote requests and conversions to orders, we are trending for this month to be the best August in the history of our company.” (Management of Companies & Support Services)

“The global tariff war, [with] steel in particular, has driven the cost of goods higher.” (Mining)

“Oil and gas hiring continues to increase, particularly in the oil-field services sector. Capital-project activity is strong in the downstream, petrochemical, midstream and onshore drilling sectors. New investment in deepwater drilling projects remains low.” (Professional, Scientific & Technical Services)

“Business activity is markedly higher now that the government is in the fourth quarter of its fiscal year and agencies need to obligate their fiscal year 2018 funds. Many contracts expiring in this time frame require renewal.” (Public Administration)

“Overall, business has increased. Many factors can be attributed to this increase in demand, [including] the budget and positive outlook on the economy.” (Real Estate, Rental & Leasing)

“Solid Q2 results, beating estimates all around. Since we are a services business, the tariffs have little impact [at this point] but are nonetheless a consideration. We do harbor future concerns about the general cost of goods from overseas and the effects on consumer pricing. In the labor market, we have seen a noticeable increase in difficulty to attract and retain talent at all levels. We have begun taking steps to change compensation packages to combat this issue.” (Retail Trade)

“Demand for transportation has started earlier than normal with the rail [industry] announcing peak season surcharges that were effective August 1. We are having to re-adjust inventory levels sooner than anticipated.” (Wholesale Trade)


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