Big Positive Reversal In ISM Services

by: Bespoke Investment Group

The ISM had a big positive reversal in July, rebounding from its lowest level in over three years back to the highest level (tied with February 2013) it has seen in over a year. While economists were forecasting the headline index to rebound from 52.2 up to 53.0, the actual level came in at 56.0. On a combined basis (accounting for each sector's share in the overall economy), the ISM for July rose to 55.9, which was the highest level in nearly a year and a half.

The table below breaks the ISM down by each of the index's subcomponents and compares the current readings to their levels last month and last year. As shown in the table, in this month's report all but two components were above 50, and six out of nine saw increases. More importantly, two of the three largest increases came in Business Activity and New Orders, which is indicative of positive growth going forward. On a down note, Prices Paid was the component that saw the second largest increase this month, rising from 52.5 to 60.1. Relative to last year at this time, seven out of nine subcomponents saw increases as inventories and export orders were the only two components that saw declines.