A Big Beat. What Now?



Here we are on a Monday with soft markets at the open.  And voila, an upside surprise.  Economists had expected a rise for the ISM non-manufacturing index (NMI) to 53.1% in July from 52.2% in June.

What was announced was a big beat…

The NMI registered 56% in July, 3.8 higher than 52.2% in June. This indicates continued growth at a faster rate in the non-manufacturing sector. 

  • The Non-Manufacturing Business Activity Index increased substantially to 60.4%, which is 8.7 higher than 51.7% in June, and reflecting growth for the 48th consecutive month.
  • The New Orders Index increased significantly by 6.9 to 57.7%
  • The Employment Index decreased 1.5 to 53.2%, yet still indicating growth in employment for the 12th consecutive month. 
  • The Prices Index increased 7.6 to 60.1%, indicating prices increased at a significantly faster rate in July compared to June.

Industry Performance

16 non-manufacturing industries reported growth in July.  Listed in order – they are:

  • Arts, Entertainment & Recreation
  • Construction
  • Information
  • Wholesale Trade
  • Retail Trade
  • Finance & Insurance
  • Real Estate, Rental & Leasing
  • Agriculture, Forestry, Fishing & Hunting
  • Utilities;
  • Educational Services
  • Other Services
  • Management of Companies & Support Services
  • Professional, Scientific & Technical Services
  • Accommodation & Food Services
  • Public Administration
  • Transportation & Warehousing

Two industries reported contraction in July:

  • Mining
  • Health Care & Social Assistance

What Respondent Are Saying…

-- "The economy seems to be getting stronger with commodity prices increasing." (Information)

-- "Sequestration and healthcare reform causing uncertainty and lower revenues." (Health Care & Social Assistance)

-- "Business orders continue to grow, but at a slow pace. We are seeing growth in areas where we have been flat for many months. Economy seems to be stabilizing in some areas and heating up in others." (Professional, Scientific & Technical Services)

-- "The auto industry continues to be strong, and we expect it to continue throughout 2013." (Retail Trade)

-- "Competitive environment remains challenging." (Accommodation & Food Services)

-- "Local business continues at same pace as last year. Capital investment continues to be positive." (Wholesale Trade)

The RTI Questions:

Is this a “Buy the Beat” or “Sell the News” event?

Are you more bullish now, or is the S&P 500 priced too rich?

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