031: ISM Service Report: A Game-changer for your Wallet? 08-03-23

Ever wonder how the uncelebrated ISM Service Report could impact your wallet? Well, curiosity is rewarded in this episode of Markets with Megan. Your host, Megan Horneman, is primed to illuminate the world of the service sector - an essential, yet often overlooked, part of our economy. Unpack the sector's importance and learn about the resilience it has shown in recent months. From medical to financial services, cell phones to transportation, discover these expenses' significant role in our daily lives.

In this episode, we dare to venture into the world of inflation, highlighting the jump in the price-paid component and backlog of orders. We also expose potential cracks in the labor market, with the employment component teetering on the brink of contraction. Megan, Chief Investment Officer for Verdence Capital Advisors, walks us through these developments, their potential implications for the Federal Reserve, and how they might echo in the upcoming employment report. Tune in for an in-depth analysis of economic data you won't find elsewhere and be prepared to reach out with questions or thoughts - we're all ears.

Hello, welcome to Markets with Megan. This is Megan Horneman, the Chief Investment Officer for Verdence Capital Advisors. We're going to talk today a little bit about the ISM Service Report that came out. This is the sister report to the ISM Manufacturing Report. It doesn't often get a lot of headline attention but it's very important because the service sector so think about spending on medical bills, on financial services, on cell phone, on transportation, on communication all these things make up the majority of what we spend our money on. So this is important and it has been a resilient index that we've seen over the recent months. But what we're seeing this month is a couple things. It remained in expansion territory. That's good.

It's rare outside of a recession that this falls in contraction territory because consumers typically will cut goods items so whether that's cars or furniture or electronics before they'll cut their cell phone bill. But when you look at the details in this report from an inflation standpoint it's a little bit concerning for the Fed. The price has paid component jumped up, as well as the backlog of orders, which can both be inflationary parts of this index. The one thing from the labor market again, we're seeing some more cracks here. The employment component in this index is actually right on the brink of falling into contraction territory, so this is worth noting. The Fed will take a look at this report. We'll see if this translates into the employment report that we get tomorrow as well, and we'll continue to monitor all the rest of the economic data this week and be back to report for some more. If you have any questions or comments, please feel free to reach out to podcast at verdance dot com.