U.S. non-manufacturing activity likely quickened

Wider reports of hiring and wage gains in U.S., combined with rosier demand expectations during the next six months, propelled our Richmond Fed service -producing composite 1.75 points higher to 26.5 - the strongest reading since May 1998. In contrast, the national Markit Flash U.S. Services PMI Business Activity Index retreated by one-half point to 55.2 during the reference period. 

"While admittedly limited in scope, we are inclined to base our forecast for the ISM non-manufactur ing gauge on the former barometer and call for a third consecutive rise to an 18-year high of 61.5", says Societe Generale in a research note.

The correlation of the ISM non-manufacturing gauge and the Richmond Fed measure since 1998 stands at 0.7, while that with Markit barometer is just 0.2, adds SocGen. In July, the ISM services hiring gauge climbed by almost seven points to a decade high 59.6, while job growth across corre sponding industrie s in the BLS's employment report slowed to 195K from 225K in June.