Scott is busy preparing for our Weekly Webinar today at 4:15pm so I thought I would write a quick blog on some US economic data that was just released.
The USA Institute of Supply Management (ISM) just released their non-Manufacturing data for the month of August. This best represents what is going on in the Services sector in the US economy. Five days ago they released their ISM Manufacturing data. Both sets of data were lower than expected and lower than previous months.
What is sort of scary to us is that we all knew the Manufacturing sector in the US was slowing it's pace of expansion, and now is actually contracting, but the Services sector, which has been the glue for the US economy, appears to be growing at a markedly slower pace and is remarkably close to contracting (an ISM data point <50.0% represents contraction).
The white line is the ISM non-Manufacturing (ie Services) sector and the yellow line is the ISM Manufacturing sector.
As you can see above, the Manufacturing sector has been getting hit hard through the back half of 2015 and through 2015 with a fairly strong move higher in the first half of 2016...but down she has been going recently.
And the non-Manufacturing sector has been getting hit the past two month but pretty hard and dangerously close to the 50.0% level that represents contraction. Services are also the lowest they have been (51.4%) since Feb 2010.
Also fair to say that Manufacturing appears to lead non-Manufacturing by ever so slightly in both expansionary and contractionary periods.
Now what will the effect be on US corporate earnings for the 3Q16 (which won't start rolling out until the third week in Oct)?