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The ISM non-manufacturing index came in at 54.7 in October, 2.1 points higher than September’s reading of 52.6. The index shows accelerated growth in the non-manufacturing sector despite increasingly difficult economic conditions worldwide.

Key Takeaways

• The ISM non-manufacturing index showed faster growth at 54.7 vs. 52.6 the month before, beating expectations of 53.5.
• The non-manufacturing business activity index rose 1.8 points to 57 in its 123^rd straight month of growth.

New orders rose 1.9 to 55.6, 1.9 points higher than in September. The non-manufacturing business activity index continued its ten-year growth streak, rising 1.8 points to 57. Employment rose 3.3 points to 53.7, and the prices index dropped 3.4 points from 60 to 56.6, indicating that prices rose in October for the 29th month in a row. While the index marks renewed growth, respondents remain concerned about tariffs, the shortage of skilled workers, and the geopolitical climate in general.

13 industries grew in October, led by agriculture, forestry, fishing and hunting, utilities, and the professional sector among others. The industries that contracted were educational services, other services, retail trade, wholesale trade, and mining in that order. Respondents in the mining sector said “Our business remains at the same level. There is no expectation for new orders, since clients normally do not make capital-expenditure decisions in the last quarter. Our only expectation is with regards to the U.S.-China trade deal outcome."

ISM Non-Manufacturing Index prints at 54.7, beating the expectation of 53.5 pic.twitter.com/OERkoX7imT

— DailyFX Team Live (@DailyFXTeam) November 5, 2019

Expert Outlook

Accommodation and food services respondents cited labor shortages as a major factor in the increased cost of logistics in the industry. Construction respondents pointed to business investment, which has contracted due to the trade war, saying“Current outlooks for commodities, equipment, and materials indicate purchasing now has leverage.  Investment is still hampered by uncertainties in trade, global economic environment, manufacturing and the like.”

Real estate respondents made a note of positive consumer sentiment in the industry, saying “Business remains brisk and well ahead of last year to date, as we near the peak of our busiest season. Looking ahead, our customers remain upbeat about their business well into next year.” However, wholesale trade respondents cited the trade war as a negative factor on their business, saying "Business is still lower than this time last year due to tariff issues and a soft market."

Market Reaction

Gold prices have fallen on the day, dropping below support at $1,500. Spot gold last traded at $1,483.00/oz, down -1.66% with a high of $1,483.53/oz and a low of $1,480.28/oz. The unexpectedly positive outcome of the ISM non-manufacturing report is likely the main factor in today’s downturn, and gold is currently trading near daily lows.