Sunday, 18 of February of 2018

Economics. Explained.  

Purchasing Managers Index — Nonmanufacturing

February 5, 2018

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 rose 2.1 points in January to 59.8 after having declined 3.3 points in December.   Comments included “post holiday pickup” and “new customer dollars available for spending in the new year.”  In January, 11 of 17 service-sector  industries  reported expansion.  Good, solid, broad-based growth at a relatively high level.  At its January level the non-manufacturing index equates to GDP growth of 4.0%.

The orders component  jumped 8.2 points in January to 62.7 after having declined 4.3 points in December .  Orders continued to flow in in January.  One of the strongest months thus far in the expansion.

The ISM non-manufacturing index for employment jumped 5.3 points in January to 61.6 after having risen 0.9 point in December.   This is by far the highest level thus far in the business cycle.  Jobs growth should continue in upcoming months at about the same pace we  have seen of roughly 180 thousand per month.

Finally,  the price component rose 2.0 points in January to 61.9 after having declined 0.2 point in December.   That is the eighth consecutive monthly increase (above 50.0).  It is clear that non-manufacturing firms are encountering higher prices for their materials.

Stephen Slifer


Charleston, SC

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