ISM Non-Manufacturing Index Drops to 54.2 in October as Business Activity Eases

November 5, 2012 11:26 AM EST
U.S. markets are back into positive territory after being lower at the start of the session amid new non-manufacturing activity data from the Institute for Supply Management (ISM) today.

The ISMs U.S. non-manufacturing business activity index fell to 54.2 percent in October, from 55.1 percent in September and the Street consensus of a pop to 54.5 percent.

Business activity growth slowed from 59.9 percent down to 55.4. a 4.5 point drop.

Employment is growing at a faster pace, rising 3.8 points to 54.9 percent. New Orders growth is slowing, dropping 2.9 points from 57.7 percent down to 54.8 percent in October.

Backlog contraction is slowing, gaining 1 point to 49.0 percent in the period.

Comments from respondents include:
  • "The sluggish pace of economic recovery coupled with rapid increases in gas prices on the West Coast continue to drag down customer traffic and discretionary spending. Levels remain well below last year." (Arts, Entertainment & Recreation)
  • "Ongoing concerns about healthcare reform; reluctance to expand or hire." (Health Care & Social Assistance)
  • "Outlook is positive yet still guarded. Clients have some pent-up demand that they are acting on with short-term contracts." (Professional, Scientific & Technical Services)

One JP Morgan analyst today noted that things are still growing, but at a pace that is below expectations.

Investors and traders will continue to keep an eye on the global economy, as Europe still wades through the muck, China's growth slowdown may have hit a trough recently, and the U.S. is slated to elect its next leader as a $600 billion fiscal cliff approaches.

Into the holiday shopping season, many are expecting big things from retailers like Macy's (NYSE: M), jcpenney (NYSE: JCP), (Nasdaq: AMZN), Wal-mart (NYSE: WMT) and others as pricing competition comes to a head.

The S&P 500, Nasdaq, and DJIA are all up modestly Monday.

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