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Economy in Brief

U.S. ISM Nonmanufacturing Index Eases
by Tom Moeller  March 5, 2018

Business activity in the service sector scaled back last month, but remained strong. The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) eased to 59.5 during February from an unrevised 59.9 in January. It remained near the highest level since August 2005. The Action Economics Forecast Survey expected a slip to 59.0. The ISM data are diffusion indexes where readings above 50 indicate expansion.

Haver Analytics constructs a Composite Index using the nonmanufacturing ISM index and the ISM factory sector measure released Thursday. This composite was little changed at 59.7, also the highest level since August 2005. During the last ten years, there has been a 73% correlation between this index and the q/q change in real GDP.

Continued strength in the component series was reflected in a rise in the new orders reading to 64.8, nearly a thirteen-year high. That was followed by an increase in the business activity reading to 62.8, the highest figure in twelve months. The supplier delivery index held steady at 55.5 for the third straight month.

The employment measure declined to 55.0 from its record of 61.6 logged in January, and still suggested firm employment growth. During the last ten years, there has been an 89% correlation between the ISM nonmanufacturing sector jobs index and the m/m change in private service plus construction sector payrolls. A decreased 22% (NSA) of industries reported a rising jobs level while an increased 14% indicated a decline.

The prices paid index eased to a still strong 61.0 from 61.9. Thirty percent (NSA) of firms reported paying higher prices while six percent of firms reported them lower.

Amongst the other detail indexes, which are not seasonally adjusted, export orders improved m/m to 59.5, up from the July low of 53.0. The import index declined sharply to 50.0, the lowest level since May. The order backlog index surged to 56.0.

The ISM figures are available in Haver's USECON database, with additional detail in the SURVEYS database. The expectations figure from Action Economics is in the AS1REPNA database.

ISM Nonmanufacturing Survey (SA) Feb Jan Dec Feb'17 2017 2016 2015
Composite Diffusion Index 59.5 59.9 56.0 57.4 56.9 54.9 57.1
   Business Activity 62.8 59.8 57.8 62.9 60.1 58.0 60.8
   New Orders 64.8 62.7 54.5 61.1 59.3 57.5 59.2
   Employment 55.0 61.6 56.3 54.9 55.2 52.6 56.0
   Supplier Deliveries (NSA) 55.5 55.5 55.5 50.5 53.2 51.5 52.5
Prices Index 61.0 61.9 59.9 57.1 57.7 52.6 50.6
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