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Economy in Brief

· Recovering from earlier weakness, the service sector is back on its feet. The Institute for Supply Management's (ISM) Composite Index for the service & construction sectors rose to 53.0 from 50.5 in January. It was the highest level since the recession began in December of 2007. Moreover, the series has risen considerably from a low of 37.2 late in 2008. The latest figure exceeded Consensus expectations for a reading of 51.0. Since the series' inception in 1997 there has been a 65% correlation between the level of the composite index in the nonmanufacturing sector and the q/q change in real GDP for the services and the construction sectors.· ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997. The figures are available in Haver's USECON database.· Amongst the components, the business activity index for the service sector was above break-even for the sixth month in the last seven. The new orders index posted a rise to the highest level since 2007. Also, the employment index improved to the highest level since April 2008 and was up sharply from the 2008 low. Since the series' inception in 1997 there has been an 80% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries. · Pricing power eased slightly last month but remained near the strongest since 2008. The pricing index slipped m/m to 60.4 but was up sharply from one year ago. Since its inception ten years ago, there has been a 73% correlation between the price index and the q/q change in the GDP services chain price index.· Beginning with the January 2008 Nonmanufacturing Report On Business®, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found here. 
ISM Nonmanufacturing Survey February January December Feb. '09 2009 2008 2007
Composite Index 53.0 50.5 49.8 42.1 46.2 47.3 53.5
   Business Activity 54.8 52.2 53.2 41.3 48.0 47.4 56.0
   New Orders 55.0 54.7 52.0 41.3 47.9 47.0 54.8
   Employment 48.6 44.6 43.6 37.9 39.9 43.8 52.0
   Supplier Deliveries (NSA) 53.5 50.5 50.5 48.0 49.0 51.1 51.1
Prices Index 60.4 61.2 59.6 48.9 49.4 66.0 63.8
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