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October 4, 2017 By Peter Boockvar

Again, ISM says this, Markit says that


Services

The ISM September services index jumped to 59.8 from 55.3 and that was well above the estimate of little change at 55.5. It’s also the best read since August 2005. New orders rose 6 pts to 63, just off the best level since the election that was seen in April. Backlogs were up by 2.5 pts to 56, a 4 month high. Employment was higher by .6 pts to 56.8, a 4 month high too. Export orders (only a few service companies report them) rose by 1 pt. The improvement in these internals did come with more price pressures as prices paid spiked by 8.4 pts to 66.3, the highest since February 2012. I’m sure the hurricanes had an impact specifically here. The ISM said the growth in services came despite the hurricanes and “respondents’ comments indicate a good outlook for business conditions.”

Notwithstanding the headline jump in confidence, the number of industries of the 18 surveyed that saw growth remained at 15 for a 3rd straight month.

Bottom line, the headline ISM services print was impressive but there really wasn’t much of a change in the number of industries seeing growth. Internally, 15 industries saw new order growth vs 14 in August and vs 16 a few months ago. With employment, 10 industries saw growth vs 11 last month. With backlogs, only 8 saw growth, the same pace as August. Also of note and as seen with the manufacturing indices, Markit’s version of US business activity was not as optimistic.

….

Markit said its PMI services index fell to 55.3 from 56 in August and vs 54.7 in July. The average over the past 3 yrs is 54.3. New orders fell slightly m/o/m from the 2 yr high in August. Employment fell to a 3 month low. Backlogs fell too to barely above 50. Overall activity expectations fell to a 7 month low. “Service sector firms noted that positive sentiment was linked to new business growth, although some respondents noted that there was heightened uncertainty surrounding future economic conditions.” The main similarity between ISM and Markit was on the acceleration in price pressures. “On the price front, the rates of both input cost and output charge inflation accelerated in September. Cost burdens faced by service providers increased at the fastest pace since June 2015. A number of companies attributed the rise to recent hurricanes, which impacted energy, fuel and raw material prices. Average charges increased further, with inflation accelerating slightly to reach the quickest since September 2014.”

Markit bottom lined their manufacturing and services composite index by saying “future optimism is at its lowest since February, suggesting companies have become increasingly cautious about the outlook.”

Again, quite the difference in tone between the two surveys measuring the exact same sector of the US economy. As the market mostly follows ISM, US treasury yields did lift in response and the US dollar bounced off its early morning lows.

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About Peter

Peter is the Chief Investment Officer at Bleakley Advisory Group and is a CNBC contributor. Each day The Boock Report provides summaries and commentary on the macro data and news that matter, with analysis of what it all means and how it fits together.

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Disclaimer - Peter Boockvar is an independent economist and market strategist. The Boock Report is independently produced by Peter Boockvar. Peter Boockvar is also the Chief Investment Officer of Bleakley Financial Group, LLC a Registered Investment Adviser. The Boock Report and Bleakley Financial Group, LLC are separate entities. Content contained in The Boock Report newsletters should not be construed as investment advice offered by Bleakley Financial Group, LLC or Peter Boockvar. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction or investment strategy. The views expressed in this commentary should not be taken as advice to buy, sell or hold any security. To the extent any of the content published as part of this commentary may be deemed to be investment advice, such information is impersonal and not tailored to the investment needs of any specific person. No chart, graph, or other figure provided should be used to determine which securities to buy or sell. Consult your advisor about what is best for you.

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