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Statistical Confusion, Services ISM at Three Year Low

Posted by Joseph Trevisani on Jul 3, 2013 10:35:00 AM

Hard on the heels of a better than expected labor market report, the Insitute for Supply Management reported that its index of service sector activity dropped to a more than three year low led by a plunge in new buisness.

The services index fell to 52.2 in June from 53.7 in May, well short of analysts prediction for a gain to 54. The index for new orders, the most forward looking of the components, skidded to 50.8 from 56, for the lowest level since July 2009, just a month after the recession ended. Readings above 50 indicate expansion, below contraction.

The manufacturing sector went the opposite direction in June as reported last week,  rising to 50.9 from 49.0, which had been the lowest post-recession reading since 48.9  in July 2009.

This year's high for the general services index was 56 in February. The post-recession top has been 59.7 in February 2011.

The services sector is between 85% and 90% of the U.S. economy and employs the bulk of the American work force.

Adding to the puzzle the employment index climbed to 54.7 from 50.1. This will bolster optimists looking for a better than expected jobs report on Friday from the Labor Department. The economy is predicted have created 165,000 jobs last month.

Service exports dropped into contraction at 47.5 from 50 in May, import orders went the other way rising to 53.5 from 49.5.

Joseph Trevisani

Chief Market Strategist

WorldWideMarkets

Chart: FX Street

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