U.S. non-manufacturing activity likely quickened

Available service-sector soundings in U.S. have been mixed in August. Wider reports of hiring and wage gains, 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-manufacturing gauge on the former barometer and call for a third consecutive rise to an 18-year high of 61.5. 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. While traders and investors will undoubtedly focus on the employment diffusion index in this report, we would caution against reading too much into any result", says Societe Generale. 

In July, the ISM services hiring gauge climbed by almost seven points to a decade high 59.6, while job growth across corresponding industries in the BLS's employment report slowed to 195K from 225K in June.