US: ISM non-manufacturing rebounds in August - Nomura

In respect to the ISM Non-manufacturing rebounding in August, analysts at Nomura explained that the future impact on supply chain from Harvey could be limited.

Key Quotes:

"The ISM non-manufacturing index rebounded by 1.4pp to 55.3 in August (Nomura: 55.4, Consensus: 55.6), close to its six-month moving average of 56.0. This represents continued growth in the non-manufacturing sector, albeit not as robust as the growth in the manufacturing sector. Survey data so far have been consistent with our view that the economy has been growing moderately above trend with healthy domestic demand. 

The business activity and new orders indexes both improved, 1.6pp to 57.5 and 2.0pp to 57.1, respectively, implying healthy momentum. The new export orders index increased 2.0pp to 55.0, a sign that global demand remains elevated. The prices paid index rose slightly to 57.9, from 55.7, suggesting continued upward pressure on prices paid for purchased materials and services. The employment index also showed improvement, up 2.6pp to 56.2, in line with continued improvement in labor markets. Anecdotal evidence from the survey suggests that respondents overall have a continued strong outlook on hiring plans.

The adverse impact from Hurricane Harvey will likely be felt in coming months. However, on balance, respondents indicated that they expect Harvey to have a somewhat limited impact on the national supply chain for the non-manufacturing sector. 24% of the respondents indicated a short supply of input commodities, while 55.8% indicated that they are unsure. Looking six months ahead, 9.6% of the respondents indicated that supply may be affected by Harvey, while 66.3% expect no impact. It is likely that refined fuels and energy-based chemicals will be affected given the size of the energy processing sector in the area. Although uncertainty remains high, we will continue to monitor incoming data on Harvey’s impact."