March 3, 2017
The Institute for Supply Management not only publishes an index of manufacturing activity each month, they publish two days later a survey of non-manufacturing firms — which largely consists of services. The index rose 3.3 points in February from 60.3 to 63.6. That is the highest level since October 2015. At its February level the ISM group estimates GDP growth of 3.4%.
Anthony Nieves, the chair of the ISM Non-Manufacturing Business Survey Committee said, “The non-manufacturing sector reflected strong growth in February after cooling off in January. Respondents’ comments continue to be mixed, with some uncertainty; however, the majority indicate a positive outlook on business conditions and the overall economy.”
The orders component rose 2.6 points from 58.6 to 61.2. This series remains quite high and suggests that the service sector will continue to grow briskly for some time to come. Comments from respondents include: “New clients on board” and “Spending new budgets.”
The ISM non-manufacturing index for employment rose 0.5 point in February to 55.2. Jobs growth should continue in upcoming months at about the same pace we have seen of roughly 170 thousand per month. Comments from respondents include: “Adding new positions to meet the demands of new business” and “Hiring freeze that we had last month was lifted in certain areas.”
Finally, the price component fell 1.3 points in February to 57.7. Thus, prices still rose in February but at a slightly slower pace than in January. Thirteen of the 14 industries surveyed reported higher prices in February. Higher inflation lies ahead.