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Service sector steady as she goes

The December ISM service sector survey was lackluster, in that it showed no unexpected strength. But neither did it show any unexpected weakness. On balance, it was consistent with an economy that is growing at a modest-to-moderate pace, and that is something that we already knew. If there is optimism to be found here, it is that to date there is no sign of the much-anticipated double-dip recession that many, most notably the folks at ECRI, have been calling for.

The prices paid survey continues to show that a majority of businesses are paying higher prices. Inflation is alive and well—albeit still relatively muted—and deflation remains a distant memory.

The employment index shows no meaningful improvement in hiring activity, and that is about what you would expect from an economy that is growing at a 3% rate.

The good news from this survey is that there was no bad news. That may not sound very impressive, but I think it is, since I believe that the market continues to be priced for disappointing news. When the market expects deterioration, the simple absence of deterioration becomes bullish.

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