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ISM Services Belies PMI Weakness

US DATA
  • Tsys extend their sell-off (2YY +12.5bps, 10YY +16bps) after the stronger-than-expected US ISM services index in August (from 56.7 to 56.9, 55.4 expected) was in firm contrast to the decline in the service PMI from 47.3 to 43.7. The gap of 13pts is a new high since being above the service PMI since Jul’21. It’s a solid ISM report, led by “increases in business activity, new orders and employment”.
  • “Based on comments from Business Survey Committee respondents, there are some supply chain, logistics and cost improvements; however, material shortages remain a challenge. Employment improved slightly despite a restricted labor market.”
  • Response from the construction sector where starts/sales are sliding: “Some pullback on projects by clients, but activity is still strong for our company. This has alleviated some labor availability issues. Generally, there has been improvement in lead times and prices, but still longer and higher, respectively, than in 2021.”

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