November 2017 Institute for Supply Management

Economic activity remained strong in November 2017 according to the latest data from the Institute for Supply Management.  Both the goods and services sides of the economy maintained tallies well over 50.0, the level considered neither expansionary nor contractionary.  This continued strength bodes well for the fourth quarter figure on Gross Domestic Product (GDP) which will be released at the end of January.

Manufacturing’s index came in at 58.2, falling marginally from 58.7 in October.  While the tally was slightly lower, the reading is still strong.  Production’s count was up a dramatic 2.9 points to 63.9 and employment reached 59.7; these are both coincident components of the ISM and demonstrate the current health of the economy.  Fortunately, forward-looking components were strong as well.  New orders rose 0.6 to 64.0, and backlog orders held steady at 55.0 (which is high for this portion of the report); these two lines point to further improving output ahead as firms attempt to clear their backlog while getting started on the new requisitions.

Like the manufacturing side of the economy, the services ISM tally included healthy readings for both coincident and forward-looking components.  It is worth noting that the headline tally fell to 57.4 from 60.1, but the current level is still strong.  Business activity (output) came in at an impressive 61.4 while employment reached 55.3.  New orders hit 58.7 and backlog orders were at 51.5.

These two indicators point to continued growth in the months ahead.  However, there was some slowing on the services side of output (the larger of the two sides), so Atlas will keep a watchful eye on this in the coming months, looking for additional signs of slowing economic growth.  For now, there is not enough evidence that such a slowdown is occurring, so the most reasonable conclusion is that output remains on a steady upward trajectory.