ISM - Stability/Growth Thesis Developing

ISM report this morning (underline mine):


Economic activity in the non-manufacturing sector grew in October for the 10th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business.
 

"The NMI (Non-Manufacturing Index) registered 54.3 percent in October, 1.1 percentage points higher than the 53.2 percent registered in September, and indicating continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index increased 5.6 percentage points to 58.4 percent, reflecting growth for the 11th consecutive month at a substantially faster rate than in September. The New Orders Index increased 1.8 percentage points to 56.7 percent, and the Employment Index increased 0.7 percentage point to 50.9 percent, indicating growth in employment for the second consecutive month and the fourth time in the last six months. The Prices Index increased 8.2 percentage points to 68.3 percent, indicating that prices increased significantly faster in October. According to the NMI, 11 non-manufacturing industries reported growth in October. Respondents’ comments remain mixed about business conditions and vary by industry and company. The trend of the overall comments indicates that there are signs of economic stabilization.” 

My takeaways (non-headline):

• Inventory sentiment better;
• Employment better in non-manufacturing and manufacturing;
• Backlog in non-manufacturing better

Hard to find significantly negative data here.  Signs are pointing to better times (alleviating the real need for QE, but we'll probably get it anyway here in the US).

More:

Commodities Up in Price

Airline Tickets; Beef; Cable and Cable Products; Coated Freesheet; Computer Accessories; Copper (2); Cotton Products (2); Dairy; #1 Diesel Fuel; #2 Diesel Fuel (4); Fuel (10); Gasoline; Lumber Products; Pork; and Rebar.

Commodities Down in Price

Consulting Services; and Shingles.

Commodities in Short Supply

Coated Groundwood (4); and Telephone Components. 

What is interesting here:  Lumber is up in price, but the three industries reporting contraction in October are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; and Construction.  Is the increase in lumber prices signaling an increase in construction and timber prices (forestry)?

The industries reporting a reduction in employment in October — listed in order — are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Accommodation & Food Services; Transportation & Warehousing; Construction; Wholesale Trade; and Professional, Scientific & Technical Services.  This sucks for out-of-work credit/investment guys like me.  Seriously, this is getting old.  Too much experience?  Really?

Prices paid by non-manufacturing organizations for purchased materials and services increased in October at a significantly faster rate than in September. ISM’s Non-Manufacturing Prices Index for October registered 68.3 percent, 8.2 percentage points higher than the 60.1 percent reported in September. In October, the percentage of respondents reporting higher prices is 32 percent, the percentage indicating no change in prices paid is 65 percent, and 3 percent of the respondents reported lower prices. Something inflationary this way comes?

In October, 13 industries reported an increase in prices paid, in the following order: Wholesale Trade; Arts, Entertainment & Recreation; Accommodation & Food Services; Information; Mining; Construction; Educational Services; Utilities; Transportation & Warehousing; Finance & Insurance; Public Administration; Retail Trade; and Professional, Scientific & Technical Services. No industry reported prices as decreasing for the month of October. Five industries reported no change in prices for the month of October. 

The ISM Non-Manufacturing Inventory Sentiment Index in October registered 61.5 percent, which is 2 percentage points higher than the 59.5 percent reported in September. This indicates that respondents believe their inventories are too high at this time.

Bottom line:  Numbers look okay and are supportive of growth.  That said, remember this is survey stuff and the sample does not always reflect the population.  Stability/growth thesis continues to develop.