Monday, 22 of April of 2019

Economics. Explained.  

Purchasing Managers Index — Nonmanufacturing

April 3, 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 7.3 points in March to 57.4 after having jumped 5.0 points in February.  The February level was the highest level for this index since January 2004.    While first quarter GDP growth may be weak because of what happened in December and January, it seems clear that the economy is rebounding nicely.   In February 16 of 18 service-sector  industries  reported expansion.  Good, solid, broad-based growth.  At its March level the non-manufacturing index equates to GDP growth of 2.6%.

Anthony Nieves, Chair of the Survey Committee said, “The non-manufacturing sector’s growth cooled off in March after strong growth in February. Respondents remain mostly optimistic about overall business conditions and the economy. They still have underlying concerns about employment resources and capacity constraints.”

Typically, large changes in the overall index are led by orders which, in this case, fell 6.2 points to 59.0 after  having jumped 7.5 points in February.   At 59.0 this level portends robust growth in services in the months ahead.  Comments from respondents include: “Recovering from the pre buying during tariffs and Chinese New Year” and “Previous month was an abnormally high volume.”

The ISM non-manufacturing index for employment rose 0.7 point in March to 55.9 after having fallen 2.6 points in February.   Comments from respondents include: “Staffing up as business grows” and “Difficulty recruiting in a full employment environment.”  Jobs growth should continue in upcoming months at about the same pace we  have seen of roughly 200 thousand per month.

Finally,  the price component rose 4.3 points in March to 58.7 after having fallen 5.0 points in February.   Thirteen non-manufacturing industries reported an increase in prices paid during the month.  At its current level of 58.7, prices are rising at a moderate pace.

Stephen Slifer


Charleston, SC

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