ISM non-manufacturing index slips, on drop in prices, employment

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The U.S. services sector expanded at a slower pace in February as the non-manufacturing index fell to 59.5 from 59.9 in January, on a seasonally adjusted basis, the Institute for Supply Management reported Monday.

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

Economists polled by IFR Markets had expected a 59.0 level.

The prices paid index slid to 61.0 from 61.9. The employment index fell to 55.0 from 61.6.

The business activity/production index rose to 62.8 from 59.8, the new orders index was at 64.8, up from 62.7; backlog of orders gained to 56.0 from 50.5; new export orders increased to 59.5 from 58.0; inventories grew to 53.5 from 49.0; inventory sentiment held at 61.0; the supplier deliveries index remained at 55.5; and imports dropped to 50.0 from 54.0.

Members' general comments on business in the month included:

  • "Lumber-related costs continue to increase as supply is also starting to become a problem. The market volatility of construction materials and the short supply of construction labor have added difficulty to long-term planning." (Construction)
  • "Slight increase in activity; beginning to see some higher cost for goods and services." (Finance & Insurance)
  • "Overall, [a] very positive outlook. Employment is low, and prices are up." (Health Care & Social Assistance)
  • "Price of oil is increasing, which will have a trickle-down effect on our business. As the major oil and gas companies increase their activity, our business will increase with a bit of a lag." (Mining)
  • "Class-A driver shortage is causing an escalation in the cost of both inbound and outbound logistics, which is increasing our cost of goods." (Accommodation & Food Services)
  • "Optimistic outlook due to GDP and tax breaks, tempered by stock market instability." (Professional, Scientific & Technical Services)
  • "Business outlook is picking up momentum due to the state of the stock-market and recent tax breaks. More investment into corporation CapEx funds." (Retail Trade)
  • "Domestic transportation is still a challenge with slower than normal transit times. Both intermodal and over-the-road carriers are struggling [with] the electronic data logs (ELDs) now required on all tractors." (Wholesale Trade)
  • "Lack of consistent government funding is decreasing spend across the Federal government." (Public Administration)
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