U.S ISM Non-Manufacturing Index Hits Highest Reading In 2016

The Institute of Supply Management (ISM) has now released the November Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services. The headline Composite Index is at 57.2 percent, a 2.4 percent increase from last month's 54.8 percent and is its highest since October 2015. Today's number came in above economist forecast of 55.4 percent.

The NMI registered 57.2 percent in November, 2.4 percentage points higher than the October reading of 54.8 percent. This represents continued growth in the non-manufacturing sector at a faster rate. This is the 12-month high, and the highest reading since the 58.3 registered in October of 2015.

As a reminder, a reading above 50.0 indicates that the non-manufacturing economy is generally expanding, and a reading under 50.0 represents that the non-manufacturing economy is contracting.

October's reading for the non-manufacturing index was 54.8. What should stand out about November's strong report is that this was the strongest composite reading of 2016, and also it is post-election data.

There has also been some relief since the exports index strengthened to 57.0 from 56.5, although the manufacturing exports have a bigger impact on overall developments surrounding the export sector, especially in terms of any Fed response to a strong currency.

The 14 non-manufacturing industries reporting growth in November — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Retail Trade; Arts, Entertainment & Recreation; Transportation & Warehousing; Other Services; Management of Companies & Support Services; Construction; Finance & Insurance; Professional, Scientific & Technical Services; Accommodation & Food Services; Information; Health Care & Social Assistance; Wholesale Trade; and Mining.

The two industries reporting contraction in November are: Real Estate, Rental & Leasing; and Public Administration.

The business activity index rose also strongly to 61.7 from 57.7 previously, although the new orders index declined slightly to 57.0 from 57.7 in October. There was also a decline in the orders backlogs index to 51.0 from 52.0.

Measures of business activity and employment strengthened at companies that cover almost 90 percent of the economy, signaling growing optimism about demand. The group’s factory survey released last week also showed promise, with manufacturing expanding by the most in five months.

“This last quarter is having the year finish up pretty strong,” Anthony Nieves, chairman of the ISM non-manufacturing survey, said on a conference call with reporters. “I don’t project that December is going to be much different.”

The dollar gained additional traction against the yen following the data with a move back above 114.50 to the 114.70 area, but the dollar lost ground elsewhere with EUR/USD edging higher to 1.0730. US Treasuries were down around 15 ticks on the day, but did show some resilience after the data, while equities moved higher.