ISM non-manufacturing index rises more than expected in Feb.

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The U.S. services sector expanded at a faster pace in February as the non-manufacturing index climbed to 59.7 from 56.7 in January, on a seasonally adjusted basis, the Institute for Supply Management reported Tuesday.

An index reading below 50 signals a slowing economy, while a level above 50 suggests expansion.

Economists polled by IFR Markets had expected a 57.2 level.

The prices paid index fell to 54.4 from 59.4, the employment index declined to 55.2 from 57.8.

The business activity/production index rose to 64.7 from 59.7, the new orders index was at 65.2, up from 57.7; backlog of orders increased to 55.5 from 52.5; new export orders soared to 55.0 from 50.5; inventories gained to 51.0 from 49.0; inventory sentiment slid to 59.0 from 60.5; the supplier deliveries index rose to 53.5 from 51.5; and imports fell to 48.5 from 52.0.

Members' general comments on business in the month included:

  • “We are anxiously awaiting decisions in the next couple of weeks on the fate of the proposed tariffs on China. High Chinese commitments to agriculture output will put cost pressure on food and restaurant margins.” (Accommodation & Food Services) "The beginning of the year is generally our slowest time of year in the health-care industry. [Activity] will gradually pick up until April, then be steady until the fourth quarter, when there will be a large increase." (Health Care & Social Assistance)
  • "Still strong in all areas, due mostly to commercial construction activity." (Construction)
  • "The local economy is doing well. Business lending remains competitive. The rise in interest rates have helped boost our net interest margin." (Finance & Insurance)
  • "Business continues to stay steady, with little drop off. However, we are more concerned about tariffs in the short term, since there seems to be no agreement. However, we do believe it will be a short-lived issue. In the long term, tariffs will force our suppliers to source elsewhere, which will levy more competition from manufacturers in other low- or non-tariffed countries and even in the U.S. Ultimately, the tariffs will force an improvement to the overall supply chain and better mitigate supply risk in our industry." (Management of Companies & Support Services)
  • "Increased activity level over the end of 2018." (Mining)
  • "Business continues [to] improve, and we expect it to continue through 2019. Domestic trucking availability is improving." (Other Services)
  • "Confidence is returning in the marketplace, but tariff surcharges are still in place." (Retail Trade)
  • "Tariffs continue to have an impact on our business. The contractor labor shortage continues to be the biggest supply challenge for our company and others in our region and industry." (Utilities)
  • "Seeing increases in business activity. Projecting strong sales for the month, stable prices and generally good fill rates from suppliers. Some spot outages, mostly due to capacity and planning limitations or shortfalls." (Wholesale Trade)
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