Today’s update of the ISM Non-Manufacturing (Services) Index for October corroborates the upbeat news from its manufacturing counterpart. In short, the economy continues to grow, or so these two widely watched indicators from the Institute for Supply Management suggest. The expansion is still well short of strong growth, but it's hard to make the argument that the economy is in danger of shrinking any time soon.
Although the ISM Services Index slipped a bit to 54.2 last month from 55.1 in September, it’s still well above 50 — a sign that the services sector overall is still expanding. That's no trivial point for the dominant slice of commercial activity in the U.S. Any reading above 50 equates with growth. On that note, the ISM indexes for new orders and employment indexes in services also remain well above 50.
Combined with the growth bias in ISM’s read on manufacturing, it all adds up to a convincing data set that implies that October’s economic profile will remain in the modest-growth camp when the final summary is published.
"Moderate growth in the U.S. economy continues," Joseph Trevisani, chief market strategist at Worldwide Markets, tells Reuters.
In fact, that’s been the general narrative all along. True, there have been a few bumps along the way, sometimes shaking confidence. But remaining focused on a broad set of indicators, primarily on a year-over-year basis, has offered valuable perspective on the primary trend, as shown by the regular updates of The Capital Spectator Economic Trend Index (CS-ETI). You can never really trust a handful of numbers, particularly if you're looking at how they've performed in recent months. A more reliable perspective requires looking across a broad spectrum of indicators, and filtering out the short-term noise.
The future, of course, can and does bring nasty surprises. But based on the numbers available so far, recession risk still looks low. That’s been a constant theme at CapitalSpectator.com for many months for a simple reason: the indicators, overall, tell us so. For various reasons, some analysts have been arguing otherwise, warning that the U.S. economy is poised to fall off the cyclical ledge, if it hasn’t already. A dark view of the business cycle, although understandable on an emotional level, has remained highly speculative and deeply flawed.
October’s macro profile is still in its infancy, and so anything can happen. But we’re off to a good start. Will the statistical support for anticipating modest growth continue in the days and weeks ahead? Stay tuned…