Last month I noted ISM Services PMI, Activity, and New Orders crashed Into contraction. This month we have a temporary rebound. Don’t expect it to last. 
Please consider the July 2024 Services ISM® Report On Business®
Economic activity in the services sector expanded in July, a trend that has been interrupted only three times — though twice in the last four months — since early in the coronavirus pandemic, say the nation’s purchasing and supply executives in the latest Services ISM® Report On Business®. The Services PMI® registered 51.4 percent, indicating sector expansion for the 47th time in 50 months.
Respondent Comments
- “As was the case in June, restaurant sales and traffic remain flat compared to last year. A heat wave in California, rising gas prices and general angst about menu prices have tempered consumer demand.” [Accommodation & Food Services]
- “Business in 2024 has been steady. The length of our busy season — typically March to mid-June — has extended into mid-July. Volumes have not increased considerably, but the consistency of shipments has been a benefit to our supply chain.” [Agriculture, Forestry, Fishing & Hunting]
- “Business is strong in our industry, water treatment. Prices have been fairly flat, but there’s some pressure from increasing costs.” [Construction]
- “While interest rates on home loans continue to change dramatically at times, the number of members requesting loans has remained relatively steady.” [Finance & Insurance]
- “Inflation markups have been issued from suppliers.” [Health Care & Social Assistance]
- “Business conditions seem to be stable at this time.” [Educational Services]
- “Our main market is the U.S. Due to the election year, new projects are not moving forward as expected. Many of our customers are waiting for the election results to develop new projects.” [Information]
- “High interest rates continue to affect long-term buying decisions.” [Professional, Scientific & Technical Services]
- “Cost of construction services continues to be above predicted budget. Materials deliveries are reliably on time.” [Public Administration]
- “High food costs are having an impact on customer demand and resulting in flat business overall. Business activity stable. Supplier costs also flat in general.” [Wholesale Trade]
Both last month and this month there are a few comments on prices. Note that prizes are up 86 months.
Here is the June Report Again
Diffusion Index Rebound
Other than prices, I suspect this is an artificial rebound of sorts.
Diffusion indexes only measure direction, not magnitude. For example, a business adding 5 workers will balance out a business laying off 1,000 workers.
New export orders plunged 10.1 points last month now they are up 6.8 points.
Business activity plunges 11.6 points into contraction last month. This month it is up 4.9 points and back in the plus column.
Things only need to be slightly better than to trigger a big rebound the way diffusion index work.
The same applies in reverse, of course.
Did everything only get a tad worse everywhere last month with a sharp rebound this month?
Data suggest that is not the case. Meanwhile, the jobs report was grim, and recession indicators are flying.
Recession Has Started
On July 8, I wrote Weak Data Says a Recession Has Already Started, Let’s Now Discuss When
I’ve seen enough. A recession has started. Let’s discuss starting with a very good indicator that has few false positives and no false negatives.
My follow-up post was on August 2.
August 2: The McKelvey (Sahm) Unemployment Rate Recession Rule Just Triggered
A recession indicator based off rising unemployment triggered in July. Claudia Sahm, a former Fed economist, takes credit for an indicator she did not invent. Let’s discuss.
Weakening data explains the recession call. Yield curve action provides a confirmation signal.
The global selloffs add to recession risks. Sentiment matters.
For discussion, please see Margin Calls Trigger Huge Global Equities and Bitcoin Selloff, Gold Fine
Update: The Nikkei has the biggest 2-day drop in history. Bitcoin is down 7% today and 23 percent in the last week. 18-year high margin positions hitting everything but gold.
Bitcoin has recovered a bit from the 24-hour lows, but is still down about 8.0 percent. Gold is now down about 0.80 percent as of 2024-08-05 9:45 AM Mountain.
There are no revisions to ISM numbers or any of the Fed regional diffusion indexes.
But understand there is a statistical bias: Companies that go out of business don’t respond.
A company doing poorly or struggling may not respond.
Thus a survival bias.
Your hero — TRUMP — fake as f789:
Let’s take a look at Donald Trump’s Ear
Seemingly No Injury…
https://fasteddynz.substack.com/p/lets-take-a-look-at-donald-trumps
And this is why I keep saying GDP is somewhere beween 0 and 2%. The Fed will be looking at things closely and may not cut until October if inflation is at 2% and employment is flat. Some Fed members think a cut is not even needed and the economy just needs to find normal operating rhythm at current rates. Put me in that category. Privately the Fed has said they can live with unemployment between 4-5% if inflation is around 2%. It is possible the parts of the economy that are not doing well were too reliant on the Fed at a baseline for their speculative growth rather than actual productivity growth which drives GDP.
Jim Grant is a superior intellect, and always has superior articles.
“The “exact opposite” of the gold standard is really the system in place today in the United States. One might call it the PhD standard. It’s the system of discretionary manipulation of interest rates by doctors of economics to achieve a little inflation, not too much, mind you—and maximum employment.”
https://www.coolidgereview.com/articles/gold-constructively-inhibiting
Mish, do they “revise” these numbers just as they do with the Unemployment numbers?
There are no revisions to ISM numbers or any of the Fed regional diffusion indexes.
But understand there is a statistical bias: Companies that go out of business don’t respond.
A company doing poorly or struggling may not respond.
Thus a survival bias.
If things are so bad why is money going into small caps today? Today’s sell-off is related to the financial markets/wall street attempting to force the fed to over-react and immediately start lowering rates.
Have seen this story before.
EVERYTHING in America is ALL about manipulating the facts, making up shit as they go along and EXPECTING US to SWALLOW IT WHOLE!
Tony is correct. This is a stickup but the Fed won’t cave and will keep waiting for data. Powell isn’t that guy.
Money going into small caps with Russell 2000 down 2.6%?
“The Apprentice” entered the situation room waiting for the Ayatollah with Austin and Biden.
Funny how quickly narratives change. As recently as last week the mainstream narrative was growing economy and stock market solid. Now, the mainstream media is filled with arm waving about recession and emergency Fed rate cuts. The US deserves what it gets.
For the most part, it is a herd mentality, either up & down.
Today I received an email from investment bank analyst issuing a downgrade for a stock I own, due to ‘overvaluation’. These analysts wait until the stock loses a few percentage points and ‘then they issue the downgrade’. Most of these analysts are clueless. I guess my stock wasn’t overvalued last week….only overvalued this Monday when the market is having a big sell-off. This is the tail wagging the dog.
Not only is this the everything bubble, it is also the everybody is broke bubble.
Nearly two decades of doing ‘whatever it takes’…. was always going to end like this