Data released overnight by ISM of the US Services sector paints a rosier picture than the manufacturing PMI survey suggested earlier this week.
New orders has jumped up to 62 from 56.7 and business activity to 63 (60.2 previous) and these are not numbers to be taken lightly. Employment at 59.2 should make up for the disappointing manufacturing employment which saw a surprise contraction next month, so if this trend continues it will have a positive net effect on Nonfarm payroll data 6-12 months from now.
Of the 15 sub sectors, all but one achieved growth, meaning only the mining sector declined in October.
Whilst the Services PMI and manufacturing PMIs are sending mixed signals, and despite services accounting for a higher proportion of the economy in its entity, we still take notice of what the manufacturing sector says as this tends to impact companies earlier in value chain (therefor a slightly better indicator of future economic importance). Of course we need to analyse them in tandem and not too disimilar to the Dow theory, if one market diverges (or industry in this case) we wait to see if the other one catches up before getting too ahead of ourselves.
So despite the positive read on servies PMI I will continue to monitor the manufacturing sector in due couse for a more complete, forward looking view of the US economy.