While economic indicators have been making it a habit recently of missing forecasts, today’s ISM Non Manufacturing report came in better than expected. While economists were expecting a level of 56.5 in the headline reading, the actual level came in at 56.9, which was the best reading since November. Accounting for each sector’s share of the US economy, the combined ISM PMI for February was 56.4, which was also the highest reading since November. Recent economic data has suggested weakness for the US manufacturing sector, but the Services sector, which is much larger, has been holding up just fine.
The table below lists the month over month and year over year changes for the ISM Services and each of its components in the month of February. As shown in the table, the internals of the February report were strong. The only two components that declined were Business Activity and New Orders, both of which remain comfortably in expansion mode. On the upside, the biggest increases came in Employment, which reversed a sharp drop last month, and Import Orders, which is a reflection of the strong dollar. On a y/y basis, the current ISM Services report was even more positive as all but one component (Prices) is higher now than it was a year ago.