United States ISM Non-Manufacturing Report




Using Non-Manufacturing ISM to describe the Services side of the economy (i.e. most of the economy) is amusingly malapropos.

Anyhow, the only proper way to chase a stiff shot of 6 consecutive quarters of growth accelerating en fuego’ness while also stoking the reflationary angst fire is:

  • Headline ISM Services = +3.9pts sequentially to 59.9 = 149-month high to kickstart 2018
  • New Orders = +8.2pts sequentially to 62.7 = 84-month High
  • Current Activity, Employment and Backlogs all rising
  • Prices = +2pts, north of 60 and back towards multi-year highs.  “Huge Pricing Pressure” making an appearance in the respondent commentary

Of course, the same increasing probability of backslide in overheated, inherently mean-reverting diffusion indices that we highlighted ahead of the ISM Manufacturing retreat holds for the Services series as well.

Until then, consider your Topping processes still in process.

Mr. Christian Drake via @hedgeyeusa



After cooling in December, the ISM non-manufacturing index rose to a new cycle high of 59.9 in January, The index had already posted a decade-high this fall following hurricane-related distortions, but the January reading appears to be the result of overall firming in the sector.

New Orders gained 8.2 points to a reading of 62.7  as more firms as an increase in bookings.

Services firms saw increasing prices in 15 of the 18 reporting industries. That echoes reports from the factory sector in January. While one month does not make a trend, we will watch these closely during the next few months to see if a trend takes hold.

Export and import activity has perked up, with both indices above their 6-month averages in January. The rise in imports is stronger, suggesting trade may again be a drag on Q1 GDP growth.

Industry Performance

The 15 non-manufacturing industries reporting growth in January — listed in order — are:

Management of Companies & Support Services;

Arts, Entertainment & Recreation; Mining; Utilities;

Retail Trade;


Transportation & Warehousing;

Public Administration;

Real Estate, Rental & Leasing;

Health Care & Social Assistance;

Agriculture, Forestry, Fishing & Hunting;

Educational Services;

Finance & Insurance;

Wholesale Trade;

Accommodation & Food Services.

The three industries reporting contraction in January are:


Other Services;

Professional, Scientific & Technical Services.

Screenshot 2018-02-05 14.02.27


  • “Executive management [is] excited about tax breaks for CapEx purchases in [the] new tax bill.” (Information)
  • “Month-over-month steady growth, on average, [is] 3 percent on project volume and 1 percent on total revenue.” (Construction)
  • “Signs of strong growth [in] financial performance expectations given the recent tax changes.” (Finance & Insurance)
  • “Positive outlook for 2018. We see huge pricing pressure.” (Health Care & Social Assistance)
  • “Business is starting off solid.” (Accommodation & Food Services)
  • “First quarter begins slow like 2017, but expect things to pick up later in Q1. Outlook continues to look bright for 2018.” (Professional, Scientific & Technical Services)
  • “Business activity is low due to the continued partial funding [of] bills passed (continuing resolutions).” (Public Administration)
  • “Overall, sales velocity looks strong. Some regional differences due to weather conditions, but overall, a strong month.” (Wholesale Trade)



Commodities Up in Price

Aircraft Parts; Aluminum Products; Bacon (2); Chemical Products; Copper; Copper Products (6); Copper Wire; #1 Diesel Fuel (8); #2 Diesel Fuel (6); Electrical Equipment; Fuel; Gasoline (6); Labor — Construction (11); Lumber Products (7); Natural Gas (3); Paper (2); Poly Products; Steel; Steel Plate; Steel Products (4); Transportation Costs and Transportation Services.

Commodities Down in Price

Chicken Products.


Tough day for Tyson, Sanderson Farms (funny thing about them), and Pilgrim’s Pride. Apparently, they’re implicated in colluding to fix chicken prices (and yes, I’m serious):

Mr. White via Heisenberg Report 

Commodities in Short Supply

Coated Freesheet; Construction Subcontractors; IV Solutions (6); Labor (6); Labor — Construction (22); and Labor — Temporary (5).

Note: The number of consecutive months the commodity is listed is indicated after each item.



In January, the NMI® registered 59.9 percent, 3.9 percentage points higher than the seasonally adjusted 56 percent registered in December, indicating continued growth in the non-manufacturing sector for the 96th consecutive month. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.

An NMI® above 49 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the January NMI® indicates growth for the 101st consecutive month in the overall economy, and indicates expansion in the non-manufacturing sector for the 96th consecutive month. Nieves says, “The past relationship between the NMI® and the overall economy indicates that the NMI® for January (59.9 percent) corresponds to a 4.0 percent increase in real gross domestic product (GDP) on an annualized basis.”

Screenshot 2018-02-05 14.07.24


Business Activity

ISM®’s Business Activity Index registered 59.8 percent in January, an increase of 2.0 percentage points from the seasonally adjusted December reading of 57.8 percent. This represents growth in business activity for the 102nd consecutive month. Eleven industries reported increased business activity, and seven industries reported decreased activity for the month of January. Comments from respondents include: “Post holiday pickup” and “New customer dollars available for spending in [the] new year.”

Screenshot 2018-02-05 14.08.32


New Orders

ISM®’s Non-Manufacturing New Orders Index registered 62.7 percent, an increase of 8.2 percentage points from the seasonally adjusted December reading of 54.5 percent. January represents growth in new orders for the 84th consecutive month, at a much faster rate compared with December. Comments from respondents include: “Budgeted monies are now available” and “Continued increased spending based on tax benefit and general improving economy.”

Screenshot 2018-02-05 14.09.26



Employment activity in the non-manufacturing sector grew in January for the 47th consecutive month. ISM®’s Non-Manufacturing Employment Index registered 61.6 percent, which reflects an increase of 5.3 percentage points when compared to the December reading of 56.3 percent. Thirteen industries reported increased employment, and two industries reported decreased employment. Comments from respondents include: “We hired for new product development and launch” and “Filling more open positions.”

Screenshot 2018-02-05 14.10.06


Supplier Deliveries

Supplier deliveries were slower in January for the 25th consecutive month. The index registered 55.5 percent, which is the same reading that was registered in December. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: “Weather in the South and East is impacting deliveries” and “Slowness due to weather and capacity constraints in transportation.”

Screenshot 2018-02-05 14.10.35



ISM®’s Non-Manufacturing Inventories Index contracted in January for the first time after nine consecutive months of growth and registered 49 percent, 4.5 percentage points lower than the 53.5 percent that was reported in December. Of the total respondents in January, 30 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Inventories low for post-[holiday] season and currently not reordering” and “Using stock material and not replenishing.”

Screenshot 2018-02-05 14.11.23



Prices paid by non-manufacturing organizations for purchased materials and services increased in January for the 23rd consecutive month. ISM®’s Non-Manufacturing Prices Index registered 61.9 percent, 2 percentage points higher than the seasonally adjusted 59.9 percent reported in December. Twenty-six percent of respondents reported higher prices, 70 percent indicated no change in prices paid and 4 percent of respondents reported lower prices.

Screenshot 2018-02-05 14.11.09


Backlog of Orders

ISM®’s Non-Manufacturing Backlog of Orders grew in January. The index registered 50.5 percent, which is 0.5 percentage point higher than the 50 percent reported in December. Of the total respondents in January, 38 percent indicated they do not measure backlog of orders.

Screenshot 2018-02-05 14.11.46

New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the U.S. by domestically based personnel grew in January for the 12th consecutive month at a faster rate. The New Export Orders Index registered 58 percent, which is 1.5 percentage points higher than the 56.5 percent reported in December. Of the total respondents in January, 64 percent indicated they either do not perform, or do not separately measure, orders for work outside of the U.S.

Screenshot 2018-02-05 14.12.12


The Imports Index reading of 54 percent is 1.5 percentage points higher than the 52.5 percent that was reported in December. Fifty-three percent of respondents reported that they do not use, or do not track the use of, imported materials.

Screenshot 2018-02-05 14.12.29

Inventory Sentiment

The ISM® Non-Manufacturing Inventory Sentiment Index in January registered 61 percent, which is 1.5 percentage points lower than the reading of 62.5 percent reported in December. This indicates that respondents believe their inventories are still too high at this time. In January, 29 percent of respondents said their inventories were too high, 7 percent of the respondents said their inventories were too low, and 64 percent said their inventories were about right.

Screenshot 2018-02-05 14.12.34


Source: Institute For Supply Management

Hedgeye Macro

Heisenberg Report 




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