US ISM Non-Manufacturing: Resilient but not immune – Wells Fargo


The US ISM Non-manufacturing index declined to 53.9 in November from 54.7. The details of this report suggest the service sector continues to hold up better than manufacturing, though signs of tariff-related pressure are evident, argued analysts at Wells Fargo. 

Key Quotes: 

“While the index has been in a trend decline since the start of the year, the deterioration has not been as abrupt as its manufacturing counterpart, and more notably the non-manufacturing index has remained in expansionary territory. While the service sector is not immune to trade-related uncertainty, there is still limited evidence of a more pronounced spillover of weakness from the manufacturing sector. In other words, the service sector should continue to expand.”

“Current conditions faltered in November. The largest retrenchment came in the business activity component, which declined 5.4 points, to 51.6, its lowest level this cycle. Perhaps the best indication that the service side of the economy is holding up, however, is the forward-looking new orders component.”

“Another welcome development was the 1.8-point gain in the employment component, which pushed the index up to 55.5, the highest level in five months. The employment component is a good indication of near-term payroll growth, with this month’s bounce suggesting our estimate for Friday’s employment report of 190,000 net new jobs remains reasonable.”

This report does not materially change anything for the Fed. The FOMC signaled it will be on hold for at least its meeting next Wednesday and we expect that remains the case.”

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