ISM Nonmanufacturing slows some more

The ISM nonmanufacturing composite index moderated by more than forecasts, easing to 53.8 in June from 55.4 in May. The general sentiment business activity index fell to 58.1 from 61.1.

BOTTOM LINE: Both of the ISM surveys and the employment report point to slower growth in June—although the data remain a far cry from suggesting that the economy is contracting. Our interpretation is that the contribution from the inventory cycle is likely diminishing, resulting in the economy slowing towards the pace of growth of underlying demand. While we believe that growth will continue at around 3% or so in the third quarter as private capital spending picks up, it may take a couple of months of data to persuade market participants that the economy is not falling into a double-dip recession (which are frequently forecast but rarely seen).


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