US: ISM suggests service-sector activity is holding up better than manufacturing – Wells Fargo

The ISM Service sector PMI rose above expectations in November to 56.5 from 54.4 in October. Analysts at Wells Fargo point out employment crossed back into expansion territory, wait times shortened and prices came down slightly. As a negative, they see a drop in orders sullied, an otherwise encouraging report for the service sector.

Key Quotes: 

“A surge in business activity lifted ISM services to a consensus-defying print of 56.5 in November. Employment crossed back into expansion territory, wait times shortened and prices came down slightly. Only a drop in orders sullied an otherwise encouraging report for the service sector.”

“The ISM suggests service-sector activity is holding up better than manufacturing, but the gain in the headline number does not mean that all categories are improving. The better-than-expected gain was due almost entirely to a 9.0 point gain in the business activity index, which marks the largest one-month gain since March 2021. This component is also now at its highest reading in almost a year, signaling current activity remained widespread through November. Only one industry, finance and insurance, reported a decrease in business activity last month.”

“The only headline-feeding decline was in the new orders component, though this should not be glossed over. This key leading indicator slid for the fourth-consecutive month to 56.0. This still marks expansion but is consistent with lost momentum and could foreshadow a more significant slowdown is yet to come.”