fundamental alert

ISM Non-Manufacturing Surprisingly Rises in December, Factory Orders, Pending Home Sales Plunge in November

Tuesday, 06 January 2009 14:05:11 GMT  |  Terri Belkas, Currency Strategist

The release of multiple US economic indicators at 10:00 ET reflected mixed results, leading the US dollar to initially pull back. Looking at the data on hand, the ISM non-manufacturing index - a gauge of business activity in the services sector - surprisingly rose to 40.6 in December from 37.3. A breakdown of the report shows that new orders, employment, and new export orders all improved slightly. However, it is necessary to keep in mind that any index reading below 50 signals a contraction in activity, so these results only indicate that growth in the services sector is still contracting, just not as sharply.

Meanwhile, factory orders tumbled 4.6 percent during the month of November, marking the fourth consecutive month of negative readings. This is similar to what we saw in the ISM manufacturing index for December, and since that index is more timely, the record low results suggest that demand for manufactured goods is bound to fall further.

Finally, pending home sales slumped 4.0 percent during November, as fewer individuals signed contracts to purchase homes. Demand for properties remains lackluster as the economy slows, job losses climb, and borrowing costs remain high despite aggressive rate cuts by the Federal Reserve. With supply levels still relatively high, the lack of demand indicates that prices have further to fall in 2009.

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