ISM U.S. non-manufacturing index 63.3 in Sept

NEW YORK, Oct 3 (Reuters) - The Institute for Supply Management (ISM) on Friday said its monthly non-manufacturing index, which measures the services sector of the economy, fell to 63.3 in September from 65.1 in August. A number above 50 indicates growth, while anything below 50 denotes contraction. Economists polled by Reuters had forecast a median reading of 62.5 in September. Following are the main ISM non-manufacturing index components: . Sept Aug July June May April March Bus Activity 63.3 65.1 65.1 60.6 54.5 50.7 47.9 New Orders 59.9 67.6 66.9 57.5 54.7 50.6 47.7 Backlog Orders 57.0 51.5 54.5 51.5 51.0 46.0 47.5 New Export Ords 56.0 58.5 47.5 49.5 49.0 52.5 48.5 Inventory Sent 60.5 62.0 60.0 62.0 63.0 62.5 66.0 Imports 55.0 60.0 54.0 50.5 58.5 50.0 55.0 Prices Index 60.1 55.7 50.6 51.4 49.6 56.7 62.0 Employment 49.1 51.0 50.7 50.3 48.7 48.2 47.9 Supplier Delivs 55.0 52.5 53.5 51.5 52.0 50.5 52.0 THE SURVEY: ISM, formerly called the National Association of Purchasing Management, compiles its diffusion index by surveying more than 370 purchasing executives in more than 62 different service industries once a month. The responses reflect the change in the current month compared to the previous month. The non-manufacturing ISM Report is seasonally adjusted for business activity, new orders, imports, and employment. The ISM non-manufacturing survey was launched in July 1997. FULL TEXT: For the text of the Institute for Supply Management's Purchasing Managers Survey. It can be found on the Internet at the following address: http://www.ism.ws/

UPDATE - US services expand briskly in Sept but no new jobs
Friday October 3, 10:36 am ET
By Eric Burroughs

(Adds detail, background, byline)NEW YORK, Oct 3 (Reuters) - The U.S. services sector expanded briskly for a sixth straight month in September but cautious businesses kept hiring in check, according to a report on Friday that showed the labor market's recovery will be slow.

The Institute for Supply Management's non-manufacturing index fell to 63.3 in September from a record-matching 65.1 in August, beating economists' forecasts for a pull-back to 62.5.

Any reading over 50 suggests growth in the five-year old survey of businesses ranging from travel agencies to restaurants and accountants, which make up about 80 percent of the U.S. economy.

The service sector has held up better than hard-hit factories in the uneven recovery in the two years since the U.S. recession ended, but they have been unable to create enough employment to offset big layoffs at manufacturers.

Even with strong growth this quarter thanks to tax cuts, many executives and economists worry that the latest economic rebound will fade once that extra cash is spent or saved. Some survey respondents said that while business is improving, they are keeping a tight grip on costs.

"Businesses in general are just very cautious. They worry that once the tax cut is spent, people will stop spending," said Ralph Kauffman, head of the ISM services survey committee.

[
this is precisely the point Mauldin makes in Market Timers or Market Cheaters?]
Let's look at some uncomfortable long-term facts facing the Fed.
First, they must clearly mistrust that the current economic growth spurt that is forecasted has "legs." In my opinion, I believe if they thought that for one minute the economy was going to grow on its own at 5% real growth for the next 18 months, I cannot imagine they would not begin to raise rates, if for no other reason than to have some room to lower them the next recession.
Why mistrust this growth? Because much of the growth is from stimulus that is not lasting. This growth is caused by (1) Bush's tax rebates, which are clearly kicking in (Wal-Mart's sales are up 5-6% year over year), (2) a huge government deficit spending (more than half the GDP growth last quarter was government [mostly defense] related) and, (3) massive mortgage refinancing which was done in the second quarter which produced a huge amount of spendable cash, which is now being spent.
]

The ISM employment index fell to 49.1 from 51.0 in August. That level suggests job losses but is close enough to the 50 line separating growth from contraction that it likely signals businesses are refraining from hiring workers.

Friday's labor report showed services added 74,000 jobs last month, the biggest gain in eight months. But factories shed 29,000 positions, bringing the total job cuts in the manufacturing sector to more than 450,000 this year.

The outlook for growth remained positive, however, with new orders still pouring in at a fast clip, though it slowed from August's breakneck speed. The new orders index slipped to 59.9 from 67.6. Backlog orders grew at a faster pace, and inventory sentiment improved, reflecting the relatively upbeat outlook.

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