April 5, 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 took a breather in March and fell 4.7 points to 58.99 after having risen 3.3 points in February to 63.6 which was the highest level since October 2015. At its March level the ISM group estimates GDP growth of 2.4%.
Anthony Nieves, the chair of the ISM Non-Manufacturing Business Survey Committee said, “The sector continues to reflect growth; however, the rate of growth has declined since last month. The majority of respondents’ comments indicate a positive outlook on business conditions and the overall economy. There were several comments about the uncertainty of future government policies on health care, trade and immigration, and the potential impact on business.”
The orders component fell 2.3 points from 61.2 to 58.9. This series still 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 fell 4.6 points in March to 51.6 after having risen 0.5 point in February. However, this series has been fairly volatile in other recent months with big increases followed by big declines a rather common occurrence. Jobs growth should continue in upcoming months at about the same pace we have seen of roughly 200 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 4.2 points in March to 53.5 after having declined 1.3 points in February. Thus, prices still rose in March but at a slightly slower pace than in February. Thirteen of the 14 industries surveyed reported higher prices in March. Higher inflation lies ahead.