US Macro: ISM-Non-Manufacturing NMI March 2017

US Macro: ISM-Non-Manufacturing NMI March 2017

As we did last week (here) with the PMI we are now going to go through the NMI. The conclusion we draw from PMI was that the industrials seemed to be quite strong. Will it be the same for services?

The first thing we are going to check is the NMI vs New Orders of the PMI. This will give us a good idea of how businessmen are feeling and how they might feel in the close future.

NMI ISM USA March 2017.png
The actual number for March’s NMI is 58.9 vs 61.2 of February. The number is very high and is consistent with what we’ve been seen in the previous months. The fact that it went down is not very important as once you get readings around 60 is very difficult for it to keep improving. As long as we don’t see a deterioration for some months is a row we should not worry.

For now, both NMI and New Orders are high, so we should be bullish and positive about the economy. However, I’d like to go a bit deeper and see how the different industries are feeling. For this, we will check the section “What respondents are saying?”.

NMI ISM USA March 2017 what respondents.png

As you can see the image is not so positive as in the PMI. While in the PMI everybody seemed as happy as ever here there are certain sectors that are concerned about Donal Trump’s policies. Overall we get a positive feeling about the economy itself.

Retail trade is positive, which makes sense according to consumer sentiment (check here). And management is also very positive, which normally is a very good symptom of the overall state of the economy.

We cannot deny that some sectors are worried, but those that are worried are also those whose business depends on the most on the administration. Such as health care and finance. Although I do find worrying the comment made by Accommodation & Food Services about worker shortages. However as worrying as it might be for the sector I believe is a symptom of a strong economy that is been able to employ many people.

Extremely interesting I find the comments made by the Utility sector. Which has been one of the strongest for several months already? A sector that tends to be defensive but is somehow feeling very strong at the moment. I believe it might be worth checking for companies in this sector. Been exposed to utility sector tends to be considered defensive so maybe someone can find some interesting companies with a good risk/reward ratio.

In conclusion, I believe NMI supports the bullish party. It keeps showing strong numbers and those sectors that are worried are not really worried about the economy itself, but about changes in regulations with the new POTUS. Which combined with the rest of indicators, it suggests we are heading into a strong economy and a strong stock market. At least in the following months.

Nuño Pérez del Barrio
Twitter: @nuopb

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