The ISM Services index was virtually unchanged in August, coming in at 51.5 from 51.4 in July, and virtually in line with the 51.4 expected. Like last month, ten of 18 industries reported growth for the month.
The business activity sub-index showed a slight deceleration in growth, but stayed in the black at 53.3, while the new orders index firmed up, rising to 53.0.
The prices paid sub-component ticked up again to 57.3 percentage points (pp) from 57.0 in July, but remains below its 2019 average. The supplier deliveries sub-index retraced some of last month’s losses, rising 2.0 pp to 49.6.
The employment sub-component pulled back to 50.2, narrowly avoiding contraction territory.
Key Implications
The services sector continues to chug along. The details were pretty good, with the sole fly in the ointment being the slowdown in employment growth. All things considered, it’s a relatively solid print given where we are in the business cycle.
While growth looks to be holding up pretty well, the Fed has been focused on labor market developments, leaving all eyes on tomorrow’s payrolls report. Rate cuts are on the way, but with the economy continuing to rumble along, we expect the Fed will deliver 75 basis points of cuts by the end of the year.
