Tuesday, 19 of February of 2019

Economics. Explained.  

Purchasing Managers Index — Nonmanufacturing

February 5, 2019

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 business activity index fell 1.5 points in January to 59.7.  Stock market volatility, tariffs, and weakness overseas (most notably in China) appear to have taken a modest toll.   However, the November level of 65.2 was was the highest level for this index since January 2004, so the declines in December and January are from a very high level.    In January, 11 of 18 service-sector  industries  reported expansion.  Still good, solid, broad-based growth but obviously not quite as robust as in earlier months.  At its January level the non-manufacturing index equates to GDP growth of 2.8%.

Typically, large changes in the overall index are led by orders which, in this case, fell 5.0 points to 57.7.  Even though the index declined, orders continued to flow in at a solid pace in January.

The ISM non-manufacturing index for employment rose 1.2 points in January to 57.8 after having fallen 1.8 points in December.   Jobs growth should continue in upcoming months at about the same pace we  have seen of roughly 190 thousand per month.

Finally,  the price component rose 1.4 points in January to 59.4 after having declined 6.3 points in December.   Prices continued to climb in January, but at a slower pace than in most other recent  months.

Stephen Slifer


Charleston, SC

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