Now that’s a strong report. This morning the ISM Non-Manufacturing Purchasing Managers Index came in at 57.1 for September. That was well above the August reading at 51.4 and above the consensus among economists surveyed by Briefing.com of 52.8. Economists surveyed by Bloomberg had expected a move up to 53.
The weak August reading had raised fears that the dominant service sector in the U.S. economy was headed to a slowdown. Today’s report wipes those worries off the books. (Remember that in this index anything below 50 signals that the economy is contracting. Anything above 50 signals expansion.) The September reading of 57.1 is the highest since October 2015.
Almost every sub-index recorded a significant improvement. The New Orders Index, for example, rose to 60.0 from 51.4. (That’s the biggest jump since April 2009 when the U.S. economy was climbing out of the Great Recession.) The Backlog of Orders Index climbed to 52.0 from 49.5.
Now let’s see if Friday’s employment report confirms this strength in the economy. If it does, I’d expect the market consensus to move even more strongly in favor of a December 14 interest rate increase from the Federal Reserve.