U.S. ISM non-manufacturing index drops in July

The U.S. ISM non-manufacturing index dropped in July. The index dropped fell 3.5 points to 53.9, the lowest level in a year. The headline print came significantly below market expectations that anticipated a moderate drop to 56.9.

The vast majority of indicators fell on the month, with new orders, business activity and employment recorded the biggest drops. Meanwhile, the prices paid sub-index rebounded by 3.6 points to 55.7, indicating that prices rose at a more rapid pace in July than in the month prior- the second consecutive acceleration.

In spite of the pullback, comments from survey contacts continued to be greatly positive. Furthermore, almost all of the non-manufacturing industries surveyed recorded growth in July, with Management of Companies, Agriculture, and Forestry, Fishing & Hunting being the only exceptions.

The ISM non-manufacturing index followed its manufacturing equivalent and slowed in July. But the performance was markedly worse, with the slowdown being more apparent in magnitude and wider throughout sub-indicators. In all, while the drop in the headline and among the main sub-indicators is dismaying, the fact that the index stays in expansionary territory and that most industries continue to report growth and stay positive, imply that today’s pullback is less concerning, noted TD Economics.

The deterioration in the employment sub-index, taken together with an equivalent dropped in its manufacturing report and a below-consensus print in yesterday’s ADP employment report implies some potential weakness in the upcoming payrolls report and poses a downside risk to the expectation that the U.S. economy added 183k jobs in July.

At 17:00 GMT the FxWirePro's Hourly Strength Index of US Dollar was slightly bullish at 69.7375. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

FxWirePro launches Absolute Return Managed Program. For more details, visit http://www.fxwirepro.com/invest