Wednesday, May 4, 2011

Weak ISM service report likely an outlier

The April ISM service sector surveys were much weaker than expected, but all components remained above 50, indicating that the sector is still expanding, only at a slower pace. The biggest decline came in the new orders sub-index, but the decline was so large and abrupt as to be suspicious. The economic data are not always consistent, and monthly fluctuations and aberrations do occur, and this is probably one of those times. Other indicators continue to reflect ongoing growth. The manufacturing sector is very strong, commodity prices are quite high, car sales are rising, financial conditions remain generally healthy, and there is no indication in either the Challenger survey or the ADP employment report (see charts below) to suggest that the economy is suddenly falling off a cliff.

The ADP report suggests that we are likely to see private sector job gains of around 200K in Friday's employment report, which in turn would mark a continuation of modest, unspectacular economic growth.


TradingStrategyLetter - Weekly Summary said...

Congress is asking for US$2T to be added to debt ceiling. More than likely these stats have been fudged.

Benjamin Cole said...

This economy needs a shot in the arm.

Tax-reg cuts for business, lower federal deficits, and QE3.

There is no prudence in following in the footsteps of Japan.