The headline ISM PMI level for the US services industry witnessed an unexpected increase of 0.9 points to 52.7, as opposed to economists' expectations of 52. Additional rises were seen in N-MFG employment and N-MFG business activity which rose 0.5 points and 1 point leaving them at 50.7 and 55.1 points respectively.
New orders were flat at 55.5 and prices fell 0.3 points to 58.3.
Surprisingly, it seems employment is still expanding in services which may be attributed to the layoffs occurring in manufacturing as well as seasonal changes in the lead-up to Christmas. Furthermore, investors are seeing improvement given companies stocking up for Christmas and interestingly, healthcare facilities acquiring supplies for flu season.
Despite this being the 11th consecutive month of expansion for services, the economic outlook suggests weakening demand. Additionally, the report mentions ongoing concerns about the strength of consumer spending due to to employers scaling back on hiring and wage gains receding.
Going forth, the outlook for services is very much dependent on consumer confidence in the economy as typically, services come at a premium. This in turn means if consumers have poor expectations for the economy, they will be likely to save rather than buy another month of Netflix, for example. Thus, if/when this metric shows contraction, it is likely a soft landing may not be on the table after all. However, for now, a soft landing seems to be the case...
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