February 2019 Institute for Supply Management

America’s economy continued growing in February 2019 according to two indicators from the Institute for Supply Management.  Each month they survey purchasing managers from firms representing the manufacturing and services segments of the economy.  In this latest survey, each side was well above minimum levels associated with growth. 

Their nonmanufacturing reading reached 59.7, rising from 56.7 in January.  This is the 109^th consecutive month of growth for America’s service sector.  Business activity moved up to 64.7 from an already impressive 59.7 to start the year; this bodes well for first-quarter gross domestic product.  Looking ahead, new orders accelerated 7.5 percentage points to 65.2 which should turn into future output as those requisitions are completed.  Employment softened some, but the 55.2 reading is still strong. 

Data on the manufacturing portion of the economy was somewhat less upbeat.  The overall index fell 2.4 percentage points to 54.2.  Production (a coincident indicator) fell quite a bit, down 5.7 points to 54.8 which offsets some of the services sector’s business activity improvement.  Looking further down the pike, new orders decelerated to 55.5, so this could foretell deceleration.  Like the nonmanufacturing report, employment growth slowed which could show up in tomorrow’s employment report released by the Bureau of Labor Statistics. 

February was a mixed bag for output.  The larger services sector improved, a positive.  However, the manufacturing side (which tends to be sensitive to the business cycle) decelerated.  This iteration of ISM sums up what we see in most indicators: economic output is increasing but there are signs suggesting output is finding it tougher to achieve acceleration.