Is the services economy slowing to a crawl like the manufacturing economy? The February 2016 Non-Manufacturing ISM Report on Business indicated that economic activity in the non-manufacturing sector grew in February for the 73rd consecutive month. That sounds great, but the reality is that the good news mostly stops there.
The non-manufacturing index came in at 53.4%, down from the prior month's 53.5% and just a tad higher than the 53.1% consensus estimate from Bloomberg.
February's Business Activity Index came in at 57.8%. The New Orders Index was 55.5% and showed expansion, while there was contraction in the Employment Index at 49.7%.
While this is technically growth, it is at a slightly slower rate in the non-manufacturing sector. The Business Activity Index was actually 3.9 percentage points higher than in January, but the New Orders Index was a percentage point lower.
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The reading on the Employment Index was where the big surprise was seen, as it was a drop of 2.4 percentage points from January. The Institute for Supply Management said that this is the first time the employment index has contracted since February 2014.
Other readings were seen as follows:
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The Prices Index decreased 0.9 percentage point from the January reading of 46.4 percent to 45.5 percent.
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14 non-manufacturing industries reported growth in February.
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The majority of the respondents' comments continue to be positive about business conditions.
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The respondents are projecting a slight optimism in regards to the overall economy.
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There is an increase in the number of industries reflecting growth in both New Orders and Business Activity.
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The NMI has decreased slightly due to the contraction in the Employment index.
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Supplier deliveries were down 1 point to 50.5.
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Inventories were up 1 point at 52.5.
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The Backlog of Orders index was flat at 52.0.
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New Export Orders was up 8 points at 53.5% and the Imports index was up 9.5 points to 55.5%.
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