In contrast to the Markit US Services report which went into contraction for the first time since October 2013, the ISM Non-Manufacturing Services report is still in positive territory. However, the ISM employment index contracted for the first time since February 2014.
Economic activity in the non-manufacturing sector grew in February for the 73rd consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.
“The NMI® registered 53.4 percent in February, 0.1 percentage point lower than the January reading of 53.5 percent. This represents continued growth in the non-manufacturing sector at a slightly slower rate. The Non-Manufacturing Business Activity Index increased to 57.8 percent, 3.9 percentage points higher than the January reading of 53.9 percent, reflecting growth for the 79th consecutive month at a faster rate. The New Orders Index registered 55.5 percent, 1 percentage point lower than the reading of 56.5 percent in January. The Employment Index decreased 2.4 percentage points to 49.7 percent from the January reading of 52.1 percent and indicates contraction after 23 consecutive months of growth. This is the first time the employment index has contracted since February 2014.
The Prices Index decreased 0.9 percentage point from the January reading of 46.4 percent to 45.5 percent, indicating prices decreased in February for the fourth time in the last six months.
According to the NMI®, 14 non-manufacturing industries reported growth in February. The majority of the respondents’ comments continue to be positive about business conditions. The respondents are projecting a slight optimism in regards to the overall economy. There is an increase in the number of industries reflecting growth in both New Orders and Business Activity; however, the NMI® has decreased slightly due to the contraction in the Employment index.”
Non-Manufacturing ISM
| Index | Feb | Jan | PP Change | Direction | Rate of Change | Trend in Months |
|---|---|---|---|---|---|---|
| NMI® | 53.4 | 53.5 | -0.1 | growing | Slower | 73 |
| Business Activity / Production | 57.8 | 53.9 | 3.9 | growing | Faster | 79 |
| New Orders | 55.5 | 56.5 | -1.0 | Growing | Slower | 79 |
| Employment | 49.7 | 52.1 | -2.4 | Contracting | From Growing | 1 |
| Supplier Deliveries | 50.5 | 51.5 | -1.0 | Slowing | Slower | 2 |
| Inventories | 52.5 | 51.5 | 1.0 | Growing | Faster | 11 |
| Prices | 45.5 | 46.4 | -0.9 | Decreasing | Faster | 2 |
| Backlog of Orders | 52.0 | 52.0 | 0.0 | Growing | Same | 2 |
| New Export Orders | 53.5 | 45.5 | 8.0 | growing | From Contracting | 1 |
| Imports | 55.5 | 46.0 | 9.5 | Growing | From Contracting | 1 |
| Inventory Sentiment | 62.0 | 61.5 | 0.5 | Too High | Fater | 225 |
ISM vs. Markit PMI
The ISM numbers differ sharply from the Markit Services PMI. For details please see Malaise Spreads to Services: US Services PMI Contracts for First Time Since October 2013.
Both ISM and Markit survey businesses in the service sector. While there are always variations, the differences this month are pretty wide.
Next month’s numbers rate to be interesting.
Mike “Mish” Shedlock
