October ISM Non-Manufacturing Index dipped slightly from September but the report demonstrates a steady record of expansion for almost three years
The Institute for Supply Management’s Non-Manufacturing Index declined more than expected in October, falling to 54.2 from September’s 55.1. Economists had been expecting a less-significant dip to 54.9. In its report, the ISM emphasized that this was the 34th consecutive month in which the index was above 50, indicating expansion. The Employment Index rose for the third consecutive month, gaining 3.8 percentage points to reach 54.9 percent. Although October’s expansion was a bit less than what was seen in September, the fact that the all-important Employment Index made such a big move should be well-received by the stock market. ISM Services Index for October Points to Continued Growth
From the report:
The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. ”The NMI™ registered 54.2 percent in October, 0.9 percentage point lower than the 55.1 percent registered in September. This indicates continued growth this month at a slightly slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 55.4 percent, which is 4.5 percentage points lower than the 59.9 percent reported in September, reflecting growth for the 39th consecutive month. The New Orders Index decreased by 2.9 percentage points to 54.8 percent. The Employment Index increased by 3.8 percentage points to 54.9 percent, indicating growth in employment for the third consecutive month. The Prices Index decreased 2.5 percentage points to 65.6 percent, indicating prices increased at a slower rate in October when compared to September. According to the NMI™, 13 non-manufacturing industries reported growth in October. The majority of the respondents’ comments reflect a positive but guarded outlook on business conditions and the economy.”
The 13 non-manufacturing industries reporting growth in October — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Construction; Other Services; Management of Companies & Support Services; Finance & Insurance; Professional, Scientific & Technical Services; Accommodation & Food Services; Transportation & Warehousing; Real Estate, Rental & Leasing; Health Care & Social Assistance; Information; Educational Services; and Retail Trade. The five industries reporting contraction in October are: Mining; Arts, Entertainment & Recreation; Wholesale Trade; Utilities; and Public Administration.
The major ETFs expected to respond to the October ISM Non-Manufacturing Report on Business are:
iShares Dow Jones U.S. Financial Services Index ETF (NYSEARCA:IYG) -0.26%
iShares Dow Jones U.S. Healthcare Providers Index ETF (NYSEARCA:IHF) +0.80%
iShares Dow Jones Transportation Average Index ETF (NYSEARCA:IYT) +0.20%
Guggenheim Airline ETF (NYSEARCA:FAA) +1.01%
iShares Dow Jones U.S. Telecommunications ETF (NYSEARCA:IYZ) -0.16% Verizon: Financial Impact of Hurricane Could Be Significant
Bottom line: Although the ISM Non-Manufacturing Index took a slight dip in October, it indicated that the non-manufacturing sector is two months shy of reaching the landmark of three straight years of uninterrupted expansion. The fact that non-manufacturing employment rose by nearly four percent should reinforce investor confidence that the overall employment situation continues to improve.