This ISM Index Hit a Lifetime High in October

The ISM (Institute of Supply Management) releases a monthly report on the economic activity in the non-manufacturing or services sector. This report has a similar format to the manufacturing sector report and is prepared by conducting a survey of purchasing and supply executives in these sectors.

For October, service sector activity rose at a pace not seen since the inception of the report. The non-manufacturing index reached a lifetime high of 60.1—a 0.3 unit rise from its September reading of 59.8. Economic activity in the services sector expanded for the 94th-straight month.

According to the ISM non-manufacturing October report, 16 of the 18 industries surveyed reported growth in economic activity. The two segments that witnessed a slowdown were educational services and arts, entertainment, and recreation. Further analysis of the services industry highlights a rebound in activity in hurricane-impacted regions. Industries that benefited from this rebound include construction (ITB), real estate (VNQ), retail (XRT), rentals (REZ), and leasing.

The ISM services sector PMI (purchasing managers’ index) is a diffusion index, with any reading above 50 indicating expansion. This month’s PMI reading of 60.1 is a sign of continued expansion in the services sector (IYC), and the key forward-looking segments of the report, the business activity index and the new order index, have both shown improvements. We’re now heading into the holiday season, which is likely to add to the demand in the services sector.

In the next part, we’ll analyze the trade balance data for the previous month and discuss why the deficit rose in September.