Key Insights from the Latest ISM Data | Episode 168 | 09-05-24

Could the future of the economy hinge on the often-overlooked ISM services report? Discover why this seemingly mundane data holds the key to understanding consumer behavior and the Federal Reserve's next moves. Today on Markets with Megan, we dissect the latest report released on September 5th and reveal how the service sector is outshining manufacturing, maintaining its expansion even as other areas falter. You'll learn why the "prices paid" component is a critical inflation indicator and what its latest uptick means for potential interest rate decisions.

We'll also scrutinize the erratic employment trends within the service sector, shedding light on what these fluctuations could signify ahead of tomorrow's labor report. With consumer spending on services remaining robust, the stakes are high. Tune in to understand how these insights could impact the broader economic landscape and market movements. Don't forget to subscribe, hit the alarm bell, and check out the entire library at marketswithmegan.fm. Stay ahead of the curve!

The headlines may say this ISM services report that we got today was kind of boring and to be honest, it was. It was relatively flat for the month. It's Thursday, eptember 5th, and this is Markets with Megan. I'm coming to you today to discuss the ISM services report that we received this morning. Much on this report, but here in our group we love to look at this report. Why is that? It's because this is where most of the economic growth is generated. Consumers spend most of their money on services, not goods. So while the manufacturing report that came out earlier this week showed that we continue to contract on the manufacturing sector, the service side has actually held in pretty steady. We saw in the month of August that we've been now back in expansion territory, which is a level above 50. We reached a low in this index back in June, but we've been consistently moving right around a little above that expansion territory. So it means the service side of the economy is holding its own. Why do we really like this report? Service side of the economy is holding its own. Why do we really like this report?

Because one of the areas that we talk about consistently, and we know that the Federal Reserve is looking at is the prices paid component. This is an inflation indicator and we have often talked about how inflation is moving towards the Fed's target. It's going to give them the flexibility to cut interest rates in a couple of weeks, but they have to be very careful because service prices, where we spend the most of our money, are still growing at uncomfortably high levels and well above the level of wages. Now if you look at this report, there's a component in it for prices paid. Prices paid jumped up to 57.3. It's the second consecutive month that this has been moving higher and a level approaching 60 is worrisome and it should be something gaining the Fed's attention.

We also saw some weakness in the employment component. It was one month because if you look through this whole year, the employment component in the service side of the economy, it's up one month, it's down one month. It's up one month, it's down one month. We're going to get more information about that tomorrow in the labor report. So that's all we have today for the service side. Service side of the economy is holding its own, but the price is paid is something we have to be very careful of and what markets should not ignore and the Fed should not ignore as well. We'll be back tomorrow with the much anticipated employment report that we'll get for the month of August. If you like these podcasts, please hit the like button, subscribe, hit that alarm bell and if you want a full, detailed library of our podcasts, please go to marketswithmegan. fm. Thank you.