The ISM services index in July was 52.6, a touch above expectations of 52.1 and an increase from 52.1 in June which was the weakest since Jan ’10. The components were mixed as Business Activity rose 5.5 pts and New Orders were up by 1 pt but Backlogs fell 3 pts to 44.5, the lowest in a year and Employment contracted to 49.3, down 3 pts. This is the weakest since Dec ’11 and is in obvious contrast to the July payroll report (btw, the birth/death model added 52k jobs to the July payroll # vs just 5k in July ’11). Export Orders rose 1.5 pts to back above 50 at 51.0. Prices Paid was up 6 pts to a 4 month high. Of the 18 industries surveyed, 11 saw growth. The ISM didn’t add much in their summation of the report by saying “Respondents’ comments are mixed and vary by industry and company.” Bottom line, in the context of a slowing, mediocre economy, a number that reflects about 80% of US economic activity such as this coming in slightly better than expected and staying above 50 (in contrast to ISM mfr’g) is a relief to the markets today.
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