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Non Manufacturing ISM: Is the Pig Through the Python?
Posted By Barry Ritholtz On October 5, 2005 @ 2:00 pm In Economy | Comments Disabled
Today’s Non Manufacturing ISM data dropped to the lowest level in 2 years. At the same time, the prices paid index spiked to the highest levels ever — or at least, since ISM began surveying non-mfr businesses in July 1997.
This suggests a considerable slowdown in the Service sector, which itself accounts for ~90% of the US economy. Further, as we noted last year in Double Squeeze: Between a Rock and a Hard Place , firms are finding it increasingly difficult to pass along price increases — setting us up for a margin and earnings squeeze.
Ralph Kauffman, chair of the ISM committee that conducts the survey said: "The drop in the overall business activity index was similar to the drop after Sept. 11, 2001 — the previous largest drop — and we got an immediate bounce back after that." Note: these responses were collected before Hurricane Rita struck Texas and Louisiana.
In point of fact, the drop (11.7 in September) was (surprisingly) even larger than the decline (9.2) following 9/11.
click for larger chart
Chart courtesy of On-Line WSJ 
So here we sit, a mere 2 years after a trillion dollars worth of tax cuts stimulated the stock market, and one has to wonder whether their affects are attentuating (as we suggested was happening  over one year ago )?
Or, will the most recent weakness get blamed on Katrina/Rita ?
While I suspect its the former, don’t be too surprised if and when Katrina gets all the blame. Of course, by the time anyone figures out its merely the Fog of Katrina , it will be too late . . .
September Non-Manufacturing ISM Report On Business 
Institute for Supply Management, 10:00 A.M. ET October 5, 2005
Service-Sector Growth Cools, as Energy Prices Cast a Pall 
AGNES T. CRANE
DOW JONES NEWSWIRES, October 5, 2005 10:57 a.m.
Growth in the Services Sector Slowed in September 
THE ASSOCIATED PRESS
NYT, October 5, 2005 Filed at 12:56 p.m. ET
U.S. Treasuries Rise After ISM Non-Manufacturing Index Declines 
Oct. 5 (Bloomberg)
Article printed from The Big Picture: http://www.ritholtz.com/blog
URL to article: http://www.ritholtz.com/blog/2005/10/non-manufacturing-ism-is-the-pig-through-the-python/
URLs in this post:
 Double Squeeze: Between a Rock and a Hard Place: http://www.ritholtz.com/blog http://bigpicture.typepad.com/comments/2004/09/double_squeeze_.html
 Image: http://bigpicture.typepad.com/.shared/image.html?/photos/uncategorized/briefingnon_mfg_ism_napm.gif
 On-Line WSJ: http://online.wsj.com/documents/bcom-fuecnapmserv.htm
 suggested was happening: http://bigpicture.typepad.com/comments/2004/06/uncle_sam_helps.html
 one year ago: http://bigpicture.typepad.com/comments/2004/09/double_squeeze_.html
 Fog of Katrina: http://bigpicture.typepad.com/comments/2005/09/the_fog_of_katr.html
 September Non-Manufacturing ISM Report On Business: http://www.ism.ws/ISMReport/NMROB102005.cfm
 Service-Sector Growth Cools, as Energy Prices Cast a Pall: http://online.wsj.com/article/SB112851985481560577.html
 Growth in the Services Sector Slowed in September: http://www.nytimes.com/aponline/business/AP-Economy.html
 U.S. Treasuries Rise After ISM Non-Manufacturing Index Declines: http://www.bloomberg.com/apps/news?pid=10000103&sid=anpOq7Vc0f9k&refer=us
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