ISM comment: Stronger than expected

The ISM non-manufacturing PMI is out at a solid path, at 55.0, which is the highest level since August vs 54.5 expected and 53.9 prior. This strong performance is fueled mostly by strength in business activity and inventories. New orders, employment and new export orders all fell, but we need to highlight that the key employment index is still well-oriented at 55.2.

It constitutes a strong confirmation that the broad US economy is very resilient to the trade war and that the global manufacturing weakness (which has been pointed out by last week’s manufacturing miss) hasn’t contaminated the service sector. It also confirms the more general theme that is playing out in early 2020 that a recession is unlikely in the short-term.

On a more negative note, US durable goods orders remain weak with a print for November out at minus 2.1% vs minus 2% expected.