US ISM nonmanufacturing index falls more than expected in November

The ISM nonmanufacturing index declined to 55.9 in the November print (previous: 59.1), a sharper decline than both forecast (58.0) and the consensus (58.0) expectation. Business activity fell to 58.2 (previous: 63.0), and new orders ticked down to 57.5 (previous: 62.0). Together, these indicators of nonmanufacturing activity suggest that November saw a modestly larger deceleration than we had expected going into the report. The employment index declined to 55.0 (previous: 59.2) on the month.

Despite the larger-than-expected declines across the leading portions of the survey, most indices remain firmly in expansionary territory and suggest that service sector activity will continue to drive the expansion in the US. The one negative spot that warrants attention in this morning's report is the new export orders index (49.5, previous: 54.5), which fell into negative territory for the first time since April. This series has fared better than the corresponding component of the ISM manufacturing survey, consistent with the view that the negative effects of dollar appreciation have been felt most directly in the manufacturing sector. The export orders series in the nonmanufacturing survey is not seasonally adjusted and is, therefore, a bit more volatile.

"We will look to future readings from this indicator to gauge the effect of dollar appreciation and weak foreign growth on US nonmanufacturing exports. On balance, the November nonmanufacturing ISM was a touch below our expectations, but service sector activity remains solid", says Barclays.