US: Pull back in ISM non-manufacturing index – Nomura

Analysts at Nomura note that the US ISM non-manufacturing index pulled back very slightly by 0.7pp in March to 58.8, just below expectations (Nomura: 59.7, Consensus: 59.0).

Key Quotes

“Despite the decline, non-manufacturing business sentiment remains elevated. The new orders index declined 5.3pp to 59.5 but stayed close to the six-month average of 60.5. Meanwhile, indicators of increased demand, such as the backlog of orders and supplier deliveries index, picked up. Businesses in the construction and finance/insurance industries reported some concern about the proposed Trump administration tariffs but, consistent with the higher tariff impact on manufacturing, nonmanufacturing industries overall seemed less concerned compared with the March manufacturing survey.”

“Elsewhere, the employment index for March improved 1.6pp to 56.6, consistent with other positive labor market signals for the month.”

“GDP tracking update: Downward revisions to core capital goods orders suggest slightly less momentum in equipment investment in Q1. However, upward revisions to durable goods inventories at factories and a healthy gain in nondurable goods inventories in February point to modestly more contribution from inventory buildup in Q1. On net, after rounding, our Q1 real GDP tracking estimate remains unchanged at 1.8% q-o-q saar.”