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The modest drop in the US ISM non manufactoring index in July, to 52.7 from 53.3, suggests that the economy is not slipping into a recession but instead that growth is very weak. The fall in the composite index takes it back to a level last seen in February 2010. The decline the new orders index, to 51.7 from 53.6, was a bit more worrying as that is now at a 2-year low. Taken together with the sharp fall in the ISM manufacturing index in July, the two ISM surveys are pointing to annualised GDP growth of just 1.5%.

Meanwhile, the employment index fell, to 52.5 from 54.1. That, and the fall in the ISM manufacturing employment index, supports the view from this morning’s ADP employment report that actual private payrolls (data due Friday) rose by around 100,000 in July. A fall in government payrolls, by between 40,000 and 50,000, means that a rise in overall payrolls of just 50,000 is likely.

Overall, there will probably be some relief that the non-manufacturing index didn’t fall close to 50, like its manufacturing counterpart. But the key point is that, at the start of the third quarter, there have been few signs of a rebound in economic growth.

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