ISM Services Expand in February

The Institute of Supply Management (ISM) has now released its February services purchasing managers' index (PMI). The headline composite index is at 55.1 percent, down 0.1 from 55.2 last month. Today's number came in above the forecast of 54.5 percent.

Here is the report summary:

(Tempe, Arizona) — Economic activity in the services sector expanded in February for the second consecutive month as the Services PMI® registered 55.1 percent, say the nation's purchasing and supply executives in the latest Services ISM® Report On Business®. The sector has grown in 32 of the last 33 months, with the lone contraction in December.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Services Business Survey Committee: “In February, the Services PMI® registered 55.1 percent, 0.1 percentage point lower than January’s reading of 55.2 percent. The composite index indicated growth in February for the second consecutive month after a reading of 49.2 percent in December, the first contraction since May 2020 (45.4 percent). The Business Activity Index registered 56.3 percent, a 4.1-percentage point decrease compared to the reading of 60.4 percent in January. The New Orders Index expanded in February for the second consecutive month after contracting in December for the first time since May 2020; the figure of 62.6 percent is 2.2 percentage points higher than the January reading of 60.4 percent.

“The Supplier Deliveries registered 47.6 percent in February, indicating the fastest delivery performance since June 2009, when the index registered 46 percent. The February reading is 2.4 percentage points lower than the 50 percent recorded in January. (Supplier Deliveries is the only ISM® Report On Business® index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases.)

“The Prices Index was down 2.2 percentage points in February, to 65.6 percent. The Inventories Index grew in February after contracting for eight consecutive months; the reading of 50.6 percent is up 1.4 percentage points from January’s figure of 49.2 percent. The Inventory Sentiment Index (55.3 percent, down 0.5 percentage point from January’s reading of 55.8 percent) expanded for the third consecutive month after four straight months in contraction.

“Thirteen industries reported growth in February. The Services PMI®, by being above 50 percent for a second month after a single month of contraction and a prior 30-month period of expansion, continues to indicate sustained growth for the sector. The composite index has indicated expansion for all but three of the previous 156 months.”

Nieves continues, “Business Survey Committee respondents indicated that they are mostly positive about business conditions. Suppliers continue to improve their capacity and logistics, as evidenced by faster deliveries. The employment picture has improved for some industries, despite the tight labor market. Several industries reported continued downsizing.” [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.