US ISM nonmanufacturing index points to robust service sector activity in August

The ISM nonmanufacturing index declined to 59.0 in August from 60.3 in July, falling less than (57.5) and the consensus expectation (58.2). It was looked for payback in August from the surge higher reported in July. While three out of the four components in the headline index did move lower in August, the activity side of the report fell less than expected, pointing to a robust service sector,

"In our view. Business activity fell to 63.9 (previous: 64.9), while new orders came in just below the strong levels seen in July (63.4, previous: 63.8). The employment index fell to 56.0 from 59.6, bringing the component back in line with its three-month average", says Barclays.

Supplier deliveries, the remaining component included in the headline index, rose to 52.3 (previous: 51.5), indicating slower deliveries that are associated with an improvement in demand across the supply chain. Price pressures for the service sector remain soft, with the prices index at the lowest level since April in this month (50.8, previous: 53.7). New export orders fell to 52.0 (previous: 56.5), and the imports index moved up a bit to 51.5 (previous: 50.5).

"Both of these latter components are not seasonally adjusted or included in the headline index calculation. On balance, we read the better-than-expected ISM nonmanufacturing survey in August as indicative of continued service sector strength in Q3",added Barclays.