The Institute of Supply Management (ISM) has now released the February Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 57.3 percent, up 1.8 from 55.5 last month. Today's number came in above the Investing.com forecast of 54.9 percent.
Here is the report summary:
“The NMI® registered 57.3 percent, which is 1.8 percentage points higher than the January reading of 55.5 percent. This represents continued growth in the non-manufacturing sector, at a faster rate. The Non-Manufacturing Business Activity Index decreased to 57.8 percent, 3.1 percentage points lower than the January reading of 60.9 percent, reflecting growth for the 127th consecutive month. The New Orders Index registered 63.1 percent; 6.9 percentage points higher than the reading of 56.2 percent in January. The Employment Index increased 2.5 percentage points in February to 55.6 percent from the January reading of 53.1 percent. The Prices Index reading of 50.8 is 4.7 percentage points lower than the January’s 55.5 percent, indicating that prices increased in February for the 33rd consecutive month. According to the NMI®, 16 non-manufacturing industries reported growth. The non-manufacturing sector reflected continued growth in February. Most respondents are concerned about the coronavirus and its supply chain impact. They also continue to have difficulty with labor resources. They do remain positive about business conditions and the overall economy.” [Source]
Unlike its much older kin, the ISM Manufacturing Series, there is relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows the Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.
The more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point at 57.8 percent is down 3.1 from a seasonally adjusted 60.9 the previous month.
For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualize the short-term trends.
Theoretically, this indicator should become more useful as the time frame of its coverage expands. Manufacturing may be a more sensitive barometer than Non-Manufacturing activity, but we are increasingly a services-oriented economy, which explains our intention to keep this series on the radar.
Here is a table showing the trend in the underlying components.
ISM® NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM® NON-MANUFACTURING AND ISM® MANUFACTURING SURVEYS*
FEBRUARY 2020
| Non-Manufacturing | Manufacturing | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Index | Series Index Feb | Series Index Jan | Percent Point Change | Direction | Rate of Change | Trend** (Months) | Series Index Feb | Series Index Jan | Percent Point Change |
| NMI®/ PMI® | 57.3 | 55.5 | +1.8 | Growing | Faster | 121 | 50.1 | 50.9 | -0.8 |
| Business Activity/ Production | 57.8 | 60.9 | -3.1 | Growing | Slower | 127 | 50.3 | 54.3 | -4.0 |
| New Orders | 63.1 | 56.2 | +6.9 | Growing | Faster | 127 | 49.8 | 52.0 | -2.2 |
| Employment | 55.6 | 53.1 | +2.5 | Growing | Faster | 72 | 46.9 | 46.6 | +0.3 |
| Supplier Deliveries | 52.4 | 51.7 | +0.7 | Slowing | Faster | 9 | 57.3 | 52.9 | +4.4 |
| Inventories | 53.9 | 46.5 | +7.4 | Growing | From Contracting | 1 | 46.5 | 48.8 | -2.3 |
| Prices | 50.8 | 55.5 | -4.7 | Increasing | Slower | 33 | 45.9 | 53.3 | -7.4 |
| Backlog of Orders | 53.2 | 45.5 | +7.7 | Growing | From Contracting | 1 | 50.3 | 45.7 | +4.6 |
| New Export Orders | 55.6 | 50.1 | +5.5 | Growing | Faster | 4 | 51.2 | 53.3 | -2.1 |
| Imports | 52.6 | 55.1 | -2.5 | Growing | Slower | 2 | 42.6 | 51.3 | -8.7 |
| Inventory Sentiment | 59.3 | 54.9 | +4.4 | Too High | Faster | 272 | N/A | N/A | N/A |
| Customers' Inventories | N/A | N/A | N/A | N/A | N/A | N/A | 41.8 | 43.8 | -2.0 |
| Overall Economy | Growing | Faster | 127 | ||||||
| Non-Manufacturing Sector | Growing | Faster | 121 |
NON-MANUFACTURING ISM® REPORT ON BUSINESS® DATA IS SEASONALLY ADJUSTED FOR THE BUSINESS ACTIVITY, NEW ORDERS, PRICES AND EMPLOYMENT INDEXES. MANUFACTURING ISM® REPORT ON BUSINESS®DATA IS SEASONALLY ADJUSTED FOR NEW ORDERS, PRODUCTION, EMPLOYMENT AND SUPPLIER DELIVERIES INDEXES.
*Number of months moving in current direction.
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