ISM Non-Manufacturing Report Holds Solid

The great bulk of the nation's economy enjoyed a solid February based on ISM's non-manufacturing report where the headline index held solidly over breakeven 50, at 53.4 vs January's 53.5.

New orders came in at 55.5, down 1 point from January but still very solid. And backlog orders continue to expand, at 52.0 for a second month in a row. Strength in orders points to future strength in employment which, however, in the report's only negative dipped 2.5 points to 49.7 for the first sub-50 reading since February 2014.

Other details include a nearly 4 point rise in output (defined as business activity in this report) which is a solid indication for first-quarter growth. Prices for inputs remain in contraction and inventories continue to expand modestly. Export sales are also up though exports for this sample, in contrast to manufacturing, are limited.

The dip in employment is one of the few hints of trouble for tomorrow's employment report, but it may prove a one-month event. Otherwise, readings in this report are positive, a contrast to this morning's PMI services report and an indication of extending strength for the domestic economy.

Recent History Of This Indicator:
Slowing steadily for six months, the ISM non-manufacturing index correctly signaled the second-half dip in GDP and may be signaling disappointing growth for the first quarter. But components for new orders and backlogs have continued to show strength, though much less so for employment where growth slowed sharply in January. The services PMI from Markit Economics has also been slowing and forecasters se