The week of September 4th was a light week in terms of economic data releases.
Services Showing Increasing Strength
We begin the week of September 11th by looking at the ISM Services number that came in 54.5—beating the consensus expectation of 52.5. (Note that any reading above 50 indicates expansion.)
Below, we’re repeating the ISM Manufacturing chart as well as the ISM Services chart to show you how both improved last month:
With ISM Manufacturing at 47.60, we’re seeing it contracting at a slower rate than in the past, but notably still contracting. However, at 54.5, Services are showing increasing strength. In the last twelve months, Services has only recorded one month of contraction.
Trade: Imports & Exports in Decline
Worth noting, the second data release last week was for Trade. While the headlines are focusing on the trade deficit, we are looking at total trade to better show the entire movement of wealth.
As seen below, both imports and exports declined:
Looking at the percentage decline over the last twelve months, we can better see the shrinkage in both imports and exports:
This decline in trade is indeed a drag on economic growth, giving support to our belief that a recession is still a very real possibility. However, we are expecting the Fed to pause raising rates in September and needing to increase rates again in November.
Looking Ahead
This week we’re looking forward to releases on both the Producer Price Index (PPI) and the Consumer Price Index (CPI), which should cast light on the direction the Fed is likely to take.
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