The four District Bank surveys for the service sector aren’t the best signal of the direction of the ISM Non-Manufacturing Index. There is little consistency in the structure of the regional surveys and it is hard to compare to the ISM national numbers.
Of the four surveys, it is the revenue index in the Richmond Survey of the Service Sector that tends to correlate the best to the ISM number. In November, the index fell 9 points to 15, but the sharp decline was more of a correction and a return to trend after an outsized reading in the prior month. If this is the case, it actually accords fairly well with the increase in the indexes in the other reports. The Dallas Fed’s general business activity index in the Texas Service Sector Outlook was up 2.9 points to 4.7 in November. The New York Fed’s business activity index was up 7.2 points to 2.9 in November, shaking off a down month in October while not returning to the modest pace of growth in recent months. The Philadelphia Fed’s Non-Manufacturing Index for November rose 8.1 points to 20.7 and has been on the upswing for four months.
The service sector seemed to get some support in October, possibly with the inking of government contracts at the start of the 2020 fiscal year. This seems to have carried over into November. While non-manufacturing businesses have suffered due to uncertain trade policy and the sluggish growth abroad, the impact has been less for services and modest expansion has remained in place.
When the ISM Non-Manufacturing Index for November is reported at 10:00 ET on Wednesday, December 7, I would look for the index to firm slightly from the 54.7 in October to around 55.3 in November.
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