Thursday, June 3, 2010

ISM Non-Manufacturing Index Activity Hits 61

Contrary to the headlines the US economy continues to grow at a rapid clip. Without changes to interest rates and corporate balance sheets, it seems difficult to understand how this growth will unwind. Surely it might slow due to concerns in Europe, but it seems unlikely that the economy will be derailed.

Nice summary of the ISM Services Index from First Trust. The index remained at 55.4 for the 3rd consecutive month in May. Any number is the mid 50s is very bullish. The important note is that the Business Activity index hit 61.1 and is a more natural signs of the activity in the economy then the overall sentiment number.

Employment finally hit above 50 for the first time since the recession began. When business activity is at 61 and employment can only barely creep above 50, corporate profits should be soaring. So should the stock market but thats a different story right now. Earnings will eventually lead the market higher.

New Orders remained at a strong 57 signaling that the index will continue to report strong growth throughout the summer.

No comments: