After a better than expected ISM manufacturing # on Monday, the ISM services index also surprised to the upside at 55.1 vs 53.7 in Aug and the expectations of 53.4. It’s the best since March but these diffusion indices measure the direction of improvement, not the degree so we can’t extrapolate that things are the best since then. Business Activity improved to 59.9 from 55.6 and New Orders rose by 4 pts. Backlogs though fell by 2.5 pts to 48, Export Orders were down by 1.5 pts to 50.5 and Employment (the bulk of the labor force) fell 2.7 pts to 51.1. Prices Paid were up by almost 4 pts to the most since Feb. Of the 18 industries asked, 12 said things were better,4 worse and 2 unch. The ISM said “Respondents’ comments continue to be mixed; however, the majority indicate a slightly more positive perspective on current business conditions.” Bottom line, the US economy is hanging in there, especially compared to its other developed world brethren in Europe but with sub 2% GDP growth, it’s doing so barely with little cushion to absorb any further overseas weakness let along in the US due to our own fiscal issue concerns which seem to be clearly altering corporate investing decision making for the worse.
