Non-Mfg ISM

With modest GDP growth and a 1.4 trillion deficit downside to equities can only come from an external shock.

High unemployment keeps the Fed on hold and the 0 rate policy keeps costs of production down and keeps personal income gains modest.

At least for now, the combo of 0 rates and an 8%+ budget deficit continues to be supportive of only modest aggregate demand growth and only very modest employment growth.

Again, good for stocks, where a bit of top line growth and productivity gains keep earnings growth positive.

Karim writes:

  • Strong service sector report with particular strength in key components (orders and employment)
  • Employment index crosses 50 and at highest since 2008
  • Service sector picking up growth mantle from manufacturing
  • ADP gain plus upward revision to prior month suggest about 125-150k in private sector job growth

July June
Composite 54.3 53.8
Activity 57.4 58.1
Prices Paid 52.7 53.8
New Orders 56.7 54.4
Employment 50.9 49.7
Export orders 52.0 48.0
Imports 48.0 48.0