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Analysts at Nomura explained that the ISM non-manufacturing index fell to 60.3 in October, above expectations (Nomura: 59.3, Consensus: 59.1), from 61.6 in September.  

Key Quotes:

“Despite some easing, the headline index points to healthy activity and hovers near the six-month average of 59.0, suggesting that economic momentum remains healthy heading into Q4. However, concerns about capacity, logistics and tariffs will likely persist.”

“Many respondents expressed concerns about the ongoing trade disputes and reported higher prices for supplies amid tariffs. However, the prices-paid index declined to 61.7 from 64.2, a four-month low, and suggests some easing of input price pressure amid declines in various commodity prices including oil. In addition, the new export orders index remained elevated at 61.0, contrasting with the sharp decline in the ISM manufacturing new orders index from last week.”

“The business activity measure slipped 2.7pp to 62.5 and new orders index remained essentially unchanged at its lofty level. The employment index moderated slightly to 59.7 after rising sharply in Q3. Altogether, momentum appears intact for the nonmanufacturing sector. However, the number of industries reporting tariffs as a business concern suggests that further trade protectionism could shift sentiment relatively quickly.”