US non-manufacturing: Solid performance continues - ING

According to James Smith, Economist at ING, today's ISM non-manufacturing numbers shows that the US economy continues to perform solidly. They see the Federal Reserve raising rates during the first quarter of 2017.

Key Quotes:

“The latest release of the ISM Non-manufacturing Index indicates that the domestic economy continues to perform solidly - we expect a 1Q17 rate hike.”

“The overall index fell by 1 point to 55.5, with most of the drag came from supplier deliveries (a faster pace of deliveries is theoretically consistent with lower demand).”

“Crucially, new orders put in another strong performance and rose to the highest level since October 2015 (to 60.3). Indeed, despite lingering concerns about global growth, new export orders picked up to 55.5.”

“The employment component, which is often looked at in relation to non-farm payrolls (NFP), fell modestly. However, we’d caution that the link between a higher (lower) employment component and higher (lower) NFP growth is fairly weak.”

“Assuming political developments in the US and Europe over the next few months pass without being perceived as posing a significant risk to the global/domestic economic outlook, we expect the next rate hike in early 2017.”