ISM Service Sector Index (NMI) Heats Back Up in January

United States Postal Service (USPS) clerks sort mail at the Lincoln Park carriers annex in Chicago, Illinois on November 29, 2012. (Photo: Reuters)

The Institute for Supply Management (ISM) Non-Manufacturing Index (NMI) heated back up to 59.9 in January, a gain from 56 the previous month and much stronger than the 56.2 median forecast.

The NMI had been showing a welcomed cooling, moving down from the 60s in October to what was a lower-than-expected 56.0 in December (revised from an initial 55.9). But most readings were still in the mid-50s and indicate solid monthly growth.

“The non-manufacturing sector reflected strong growth in January after two consecutive months of pullback,” Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee said. “Overall, the majority of respondents’ comments are positive about business conditions and the economy. They also indicated that recent tax changes have had a positive impact on their respective businesses.”

The Non-Manufacturing Business Activity Index increased to 59.8%, 2 percentage points higher than the seasonally adjusted December reading of 57.8%. That marks the 102nd consecutive month of growth, which came at a faster rate in January. The New Orders Index came in at 62.7%, 8.2 percentage points higher than the seasonally adjusted reading of 54.5% in December.

The Employment Index increased 5.3 percentage points in January to 61.6% from the seasonally adjusted December reading of 56.3%. The Prices Index increased by 2 percentage points from the seasonally adjusted December reading of 59.9% to 61.9%. That marks the 23rd consecutive month prices increased.

PANEL RESPONSES

  • “Executive management [is] excited about tax breaks for CapEx purchases in [the] new tax bill.” (Information)
  • “Month-over-month steady growth, on average, [is] 3 percent on project volume and 1 percent on total revenue.” (Construction)
  • “Signs of strong growth [in] financial performance expectations given the recent tax changes.” (Finance & Insurance)
  • “Positive outlook for 2018. We see huge pricing pressure.” (Health Care & Social Assistance)
  • “Business is starting off solid.” (Accommodation & Food Services)
  • “First quarter begins slow like 2017, but expect things to pick up later in Q1. Outlook continues to look bright for 2018.” (Professional, Scientific & Technical Services)
  • “Business activity is low due to the continued partial funding [of] bills passed (continuing resolutions).” (Public Administration)
  • “Overall, sales velocity looks strong. Some regional differences due to weather conditions, but overall, a strong month.” (Wholesale Trade)

The 15 non-manufacturing industries reporting growth in January — listed in order — are: Management of Companies & Support Services; Arts, Entertainment & Recreation; Mining; Utilities; Retail Trade; Construction; Transportation & Warehousing; Public Administration; Real Estate, Rental & Leasing; Health Care & Social Assistance; Agriculture, Forestry, Fishing & Hunting; Educational Services; Finance & Insurance; Wholesale Trade; and Accommodation & Food Services.

The three industries reporting contraction in January are: Information; Other Services; and Professional, Scientific & Technical Services.

PPD Business Staff :PPD Business, the economy-reporting arm of People's Pundit Daily, is "making sense of current events." We are a no-holds barred, news reporting pundit of, by, and for the people.