Because services are roughly 3/4’s of the economy, I now pay a lot of attention to the economically weighted average of the ISM manufacturing and services indexes. Since the accession of China to normal trading status with the US, a downturn in manufacturing alone has simply not been enough to forecast recession – which has again been true in the past two years.This morning the ISM non-manufacturing (i.e., services) index again came in positive, at 52.1, while the more leading new orders subindex came in at 53.7. Their three month weighted averages are 54.3 and 56.8, respectively. 
Since the three month average for the manufacturing index is 47.4, and for the new orders component 47.9, that means the economically weighted three month averages are 52.6 for the total indexes, and 54.6 for the new orders components.This means that the economy is nowhere near a recession for the next few months, as services continue to power it forward.An interesting question is whether the strength in services, which as you can see above includes continued strong pricing pressure, translates into continued elevation in the non-shelter services portion of the CPI and PCE indexes. I haven’t done a comparison, but it very much looks like a significant correlation to calculate going forward.More By This Author:JOLTS Report For October
ISM Manufacturing Remains Weak
Real personal income and spending for October were all good; no special cause for concern yet about inflation
