economy Markets

Quick Look Under Hood Of ISM Services ‘Beat’ Shows This Car Has No Engine

"COVID-19 has halted much of our standard work..."

ISM services came in better than expected, again reflecting an apparent distortion from supplier deliveries. The non-manufacturing gauge printed 41.8 for April, better than the 38 economists were expecting, although the range of estimates was cartoonish (29 - 47.6). As was the case with the manufacturing gauge out Friday, the headline number doesn't tell the story, even as it's the lowest since 2009. Supplier deliveries rose to 78.3 from 62.1, a record high. As ever, you're reminded that in the context of COVID, higher reads do not reflect positively on the operating environment.  Rather, they reflect a broken supply chain. "Supplier deliveries are being affected by the COVID-19 crisis", the report reads. These elevated prints on the deliveries index are propping up the headline gauge, something ISM continues to emphasize. "The combined 25.9-percentage point increase [on the deliveries index] in March and April was primarily a product of supply problems related to the pandemic", Tuesday's press release remarks. Other subindexes reflect the true scope of the malaise. Business activity, for example, dropped to 26, a 22-point plunge from the previous month and a record low. Ne
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