US: ISM non-manufacturing index improves in October, still consistent with slower growth ahead – Wells Fargo

Analysts at Wells Fargo, point out that while the US ISM Non-manufacturing Index suggests an improvement in activity in October, the rebound came after a 3.8-point plunge in September, and the decline in the index since the start of the year still highlights the vulnerability of the economy to weakness in the factory sector.

Key Quotes: 

“After sliding to its lowest level in three years, the ISM non-manufacturing index improved 2.1 points to 54.7 in October. The index, which is at a level consistent with expansion, signals that broad economic activity is holding up despite manufacturing activity remaining in contraction in October.”

“The largest gain came from the hiring index, which improved 3.3 points to 53.7. This was a welcome improvement from the plunge in September, though it still suggests the pace of hiring is set to slow.”

“With both ISM surveys still pointing to slower economic growth, we believe the FOMC is not done cutting rates. We continue to expect it will leave rates unchanged at its December 11 policy meeting, but barring a significant improvement in the data, we expect it to cut rates another 25 bps at the start of next year.”