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Recap: Regional service sector surveys for August point lower

The four District Bank surveys for the service sector in August have been published. Where service sector activity has been holding up better than manufacturing in an environment of uncertain trade policy, August showed that conditions are less positive and settling into a trend of at best modest expansion.

The surveys are not particularly comparable across Districts, so it is hard to make definitive pronouncements as to what they mean for the service sector as a whole.

The New York Fed’s Business Leaders Survey showed current business activity little changed at 9.1 in August from 9.7 in July and is probably in line with underlying conditions for 2019 to-date. This is lower than most of 2018, but not so much as might suggest substantially slower activity.

The Philadelphia Fed’s Non-Manufacturing Index for August fell to 7.5 from 21.4 in the prior month. However, the index has reflected uneven conditions month-to-month in 2018 and a big swing in the level isn’t that unusual in recent months. However, even the peaks in 2019 to-date have failed to come near those of 2018 and the fundamentals appear much softer and less sustained in their expansion.

The general business activity index in the Dallas Fed’s Texas Service Sector Outlook fell to 0.2 in August from 4.7 in July. Service sector conditions for the Dallas District have been soft since December 2018 and even the scattered positive readings have not approached the pace of activity for most of 2018.

The Richmond Fed’s Survey of the Service Sector doesn’t have a specific index. Its index for revenues is the feature of the report. While revenues overall remain positive, the reading of 6 in August after 11 in July points to lackluster growth that doesn’t look set to break away from the modest pace of activity.

The Richmond revenue index has the best correlation with the ISM Non-Manufacturing Index. It probably signals that the ISM number is probably going to dip from the 53.7 reading of July when the August data is reported at 10:00 ET on Thursday, September 5. The other District Bank indexes also point in that direction.


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