Oh, A Worse-Than-Expected Surprise (Non-Manuf ISM)
Now this isn't good...
"The NMI (Non-Manufacturing Index) registered 51.5 percent in August, 2.8 percentage points lower than the 54.3 percent registered in July, indicating continued growth in the non-manufacturing sector but at a slower rate.
Still growth, so good, right? Uh, there's a problem, and it's internal.
the Employment Index decreased 2.7 percentage points to 48.2 percent, reflecting contraction after one month of growth. The Prices Index increased 7.6 percentage points to 60.3 percent in August, indicating that prices increased significantly in July.
Prices up and employment down.
Note that services are 60% of our economy, and now we have a report that says that employment is contracting in that part of the economic spectrum.
Now in contraction are both employment and new export orders, which is a horrifying development from a trade-balance perspective. The latter is going to cause problems with trade balance.....
Backlogs are also to parity at 50.5, while imports are now at 50.5 as well, so there's no growth there either - only balance. Finally, inventory is too high.
This is the worst number since January, which registered a 50.5, and is a monstrous drop from last month, which measured 54.3. Coming into the end of year (holidays anyone?) and particularly when one considers that services are a big part of getting goods to stores and such, this appears to validate the anecdotes that I've been hearing the last couple of weeks where service demand (particularly in the freight sector) absolutely went into the toilet during the last two weeks of August.
I was scratching my head at the manufacturing ISM yesterday, since it flew in the face of the Fed surveys and the anecdotal evidence that I had in various sectors, particularly freight. This report appears to confirm the anecdotes. Worse, it appears that it may be validating one of my fears with the ISM manufacturing numbers - the inventory build may well be involuntary, (as I noted last night) and if so, big trouble is right around the corner.
It certainly appears that the pump monkeys got a bit ahead of themselves with their chortling over "no double dip." I'd say the jury isn't back on that one yet folks.....
Incidentally, I happen to agree that we won't have a double-dip, but for a different reason: I don't believe we ever left the recession in the first place!
