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Economy in Brief

U.S. ISM Nonmanufacturing Index Rebounds
by Gerald D. Cohen  March 5, 2019

The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) rose more than expected to 59.7 in February. This followed two consecutive monthly declines. While suggestive of strong growth, the level of the index is below the cycle peak of 60.8 reached in September 2018. The Action Economics Forecast Survey anticipated a reading of 57.2. 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 last Friday. This composite increased to 59.1; the cycle high was 60.7 in September 2018. During the last ten years, there has been a 55% correlation between the Composite Index and the quarter-on-quarter change in real GDP.

Both the new orders and business activity measures reached cycle-highs of 65.2 and 64.7 respectively. The supplier deliveries index increased to 53.5, though vendor delivery times were still faster than much of 2018.

The employment index declined to a still strong 55.2 in February. During the last ten years, there has been an 82% correlation between the ISM nonmanufacturing sector jobs index and the month-on-month change in private service plus construction sector payrolls. Twenty-one percent of industries reported a rising jobs level while 13% indicated a decline (both of these readings are not seasonally adjusted -- NSA -- and were relatively unchanged from the previous month and a year ago).

The prices paid index fell to 54.4, its lowest level since June 2017. Fewer firms -- 18% down from 25% (NSA) -- reported paying higher prices while just eight percent of firms paid less.

Among the other detail indexes, which are not seasonally adjusted, the export order series rebounded to 55.0 from 50.5, though it is still well below year ago levels. The import index fell to 48.5, the lowest reading in 21 months.

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'18 2018 2017 2016
Composite Diffusion Index 59.7 56.7 58.0 59.1 58.9 57.0 54.9
   Business Activity 64.7 59.7 61.2 61.9 61.5 60.2 58.0
   New Orders 65.2 57.7 62.7 63.8 61.3 59.3 57.6
   Employment 55.2 57.8 56.6 55.1 56.9 55.1 52.5
   Supplier Deliveries (NSA) 53.5 51.5 51.5 55.5 55.8 53.2 51.5
Prices Index 54.4 59.4 58.0 61.3 62.1 57.6 52.6
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