U.S. ISM Services Index (October 2024)

ISM services jump to a 27-month high in October

• The ISM Services index rose 1.1 points to 56.0 in October, far better than the consensus forecast calling for a pullback to 53.8 and reaching the highest level since July 2022. 
• The employment sub-index shot higher by 4.9 points to 53, more than undoing recent months' weaker readings. Meanwhile, both the new orders (-2.0 points to 57.4) and business activity (-2.7 points to 57.2) indexes were lower on the month, though each remain well above their respective prior twelve-month averages.  
• The prices paid sub-component edged lower (-1.3 points to 58.1), while supplier deliveries times were further elongated, reaching a 27-month high of 56.4. 
• Fourteen services industries reported growth in October — listed in order — are: Retail Trade; Information; Transportation & Warehousing; Accommodation & Food Services; Finance & Insurance; Construction; Mining; Public Administration; Utilities; Real Estate, Rental & Leasing; Educational Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; and Wholesale Trade. The two industries reporting a contraction in the month of October are: Other Services; and Management of Companies & Support Services.   

Key Implications

• The ISM Services index defied expectations and rose to the highest level in over two-years in October. While both new-orders and business activity were a tad lower on the month, they both remain well in expansionary territory. Conversely, the sharp increase in the employment sub-index – reaching the highest level since February 2023 – provides further support that last week's soft job numbers were likely heavily influenced by Hurricane's Helene and Milton. Based on survey responses, recent weather events as well as last month's short-lived port-strike also seem largely to blame for the further uptick in supplier delivery times. 
• Taking a step back, service spending has remained remarkably stable through most of this year, with the three-and-six-month annualized rates of change holding steady at 2.5% as of September. With measures of new-orders and business activity still at healthy levels, the backbone of consumer spending is likely to remain a sturdy contributor to growth in the fourth quarter and into next year.     

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