The US services sector grew more slowly than expected in October. The ISM index came in at 54.5 on November 4 at 18:00 MSK. The forecast was 54.8, and in September it was 54.9.
The ISM services index is a survey of purchasing managers. It is calculated by the Institute for Supply Management. A value above 50 means the sector is growing. Below 50 means it is contracting.
Why this matters to a trader. Services account for the bulk of the US economy and employment. That is why markets read this report more closely than the manufacturing one.
What's inside the report?
The weakest spot is orders and current activity. The only component that gained was employment.
- 53.8 - business activity versus 56.5 a month earlier
- 55.9 - new orders versus 59.8
- 51.4 - employment versus 50.1
- 73.0 - prices paid index versus 74.0
Prices barely moved. The price component has held high for many months.
What did S&P Global show?
Ten minutes before the ISM, the final version of the competing S&P Global survey was released. There the picture is also worse than the preliminary estimates.
- Services 56.1. The preliminary version gave 57.9, and in September it was 58.8.
- Composite index 55.9. A month earlier the figure was 57.6.
- Business expectations. Future activity estimates fell to their lowest since May.
Chris Williamson, chief economist at S&P Global Market Intelligence, assessed the October surveys as implying GDP growth above 4% annualized. But the picture, he said, is spoiled by accelerating prices.
Williamson: average prices for services rose at one of the fastest rates in four years. Together with more expensive goods, this signals that inflation will stay above the Fed's target.
What does this mean for a trader?
The dollar did not react to the ISM release. The market treated the 0.3-point miss versus forecast as noise.
More important is the combination of figures itself. Activity and orders are slowing, while the price block remains at high values.
- Slowing demand - an argument for a rate cut
- High prices - an argument against
- The bottom line - the debate over the Fed's next step is not settled by any single report
The next dates on rates and inflation are convenient to keep in the economic calendar.
Were you in a position at 18:00 MSK?
Releases like this often pass quietly, and sometimes in two minutes they wipe out both your stop and your daily loss limit. Prop firms treat these minutes differently: some consider a trade during a data release a violation and close the account, while others separately specify leverage and allowable volume for macro releases. The rules take fifteen minutes to read, but a disabled account takes far longer to get back. A style filter immediately shows which programs even allow trading on statistics.