Non-Manufacturing ISM Goes Back Above 50, But Barely

The December non-manufacturing ISM came in at 50.1 versus 48.7, a month prior.  The Bloomberg consensus forecast was 50.5 with estimates ranging from 48.0 to 52.1.  The all important employment index finished December at 44.0 versus 41.6 in November.  The prices paid index remained well above 50 coming in at 58.7 from 57.8.  The standalone business index moved into expansionary territory with a reading of 53.7 compared to 49.6, reported last month.  The new orders index, which tends to be a forward looking component fell to 52.1 from 54.5 a month prior–reaching a four month low.  This could add to some weakness in the months ahead.

The non-manufacturing ISM’s employment index’s rise to 44.0 from 41.6 in November is unlikely to have a significant impact on forecasts for Fridays non-farm payrolls.  However, combining this morning’s ADP employment report, indicating a payroll decline of -84K, and the fact that the non-manufacturing ISM employment index is still well below 50 the probability of positive payrolls is marginally reduced.