- by New Deal democrat
This morning's ISM services report shows some weakening, but still no cause for any immediate concern.
Note that because the "ISM services" index only has about 8 years of data, in this post I am making use of "ISM non-manufacturing" which dates to 1997.
Below I've done the same thing I did with ISM manufacturing two days ago: I subtracted 58.2 from the current reading so that it shows exactly at zero (blue). I also again included ISM manufacturing (red):
There have been 5 times since 1997 that ISM non-manufacturing crossed its current bound to the downside: 1998, 2000, 2002, 2006, and 2011. The most bearish of those was October 2000, only 5 months before the onset of the next recession. The non-manufacturing reading was much weaker not just at the onset of the 2008 recession, but for 2 years prior! On the other three occasions, (1998, 2002, and 2011), there was no recession at all.
Since the 2000 recession is the closest analogue to our current situation -- an industrial slowdown triggered by a strengthening dollar -- obviously there is some cause for concern, and the US$ bears watching exceptionally closely. At the same time, today's reading like yesterday's motor vehicle sales confirms that the consumer part of the economy continues to outweigh the industrial weakness.
