- by New Deal democrat
Because that services are about 75% of the economy, even if goods production is contracting, since the turn of the MIllennium that has not necessarily meant a recession is in the offing. The economically weighted average to the ISM services and manufacturing indexes has been much more accurate since then.
To wit: the ISM services report for January, released this morning, was weaker than December, but still well into expansion territory, with the total index at 52.8, and the more leading new orders component (not shown) was at 51.3:
The three month average of each is 53.2 and 53.0 respectively.
Since the three month total average in the manufacturing index was 49.5, and for the new orders subindex 52.7, that means the economically weighted average for the two is 51.0 for the total, and 51.6.
For contrast, here is the three year record of the manufacturing index:
Things were touch and go this past summer, when several times the services index did fall below 50, but the three month weighted average of the two indexes never did so.
In summary, the economically weighted average of the two ISM indexes forecasts somewhat slow growth in the months ahead.
