Just as things were really looking up, the Institute for Supply Management steps in and tells us that the non-manufacturing sector took a step back -- actually a slower step forward -- in September:
The report [on business activity in the non-manufacturing sector] was issued today by Ralph G. Kauffman, Ph.D., C.P.M., chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee and coordinator of the Supply Chain Management Program, University of Houston-Downtown. "Non-manufacturing business activity increased for the 30th consecutive month in September," Kauffman said. He added, "Business Activity increased at a slower rate in September than in August. New Orders, Employment, New Export Orders and Imports also increased at slower rates. Many members' comments expressed concern about the continuing increase in oil and gas prices as well as Hurricane Katrina, and their impact on prices and economic activity. Only eight of 17 non-manufacturing industry sectors report increased activity in September compared to 13 that reported increased activity in August. There were reports of increased activity regarding construction and construction-related items. The overall indication is continued economic growth in the non-manufacturing sector in September, but at a slower rate of increase than in August."
As with Monday's report on the manufacturing sector, the report contained news of price pressures aplenty:
Prices paid by non-manufacturing organizations for purchased materials and services increased in September for the 28th consecutive month and at a faster rate of increase than in August. ISM's Non-Manufacturing Prices Index for September is 81.4 percent, 14.3 percentage points above the 67.1 percent registered for August. This is the highest Prices Index recorded since the inception of ISM's non-manufacturing business survey in July 1997.
The report prompted a sell-off in financial markets, and this comment in the Reuters coverage:
"The decline in the headline index is pretty amazing, given the manufacturing side boomed so much. It does suggest that GDP may be on the soft side in the third and fourth quarters," said Ian Morris, chief U.S. economist at HSBC Securities in New York.
It seems like just yesterday that I found this comment:
... figures may suggest the U.S. economy won't slow as much as government and Wall Street forecasters first predicted, economists said.
Wait a minute -- it was just yesterday. So it goes.
UPDATE: The Capital Spectator records the mixed opinion about the mixed ISM reports. The Skeptical Speculator has the news here, as well as some positive retail reports from Europe. Barry Ritholtz isn't so sure we should be blaming the hurricanes.