ISM Services Index Reports Some Of The Best Conditions In 20-Year History

ISM non-manufacturing sample is reporting some of the very best conditions in the 20-year history of this series. The composite index rose nearly 4 points in January to 59.9 which is well beyond Econoday's high estimate. New orders are arguably more important than any composite result and the reading, at 62.7, is back at last year's peak. And employment is a special standout, up more than 5 points to a very rare plus 60 score of 61.6 which is by the far the best of the post-2008 expansion. Had this reading come out before Friday's employment report, expectations would have risen for last week's January results which in fact did prove strong.

Other details range from moderate, such as backlogs which are just barely building, to very strong growth such as input costs and business activity (which is a production measure). Further confirmation of strength comes from the breadth among industries with 15 of 18 reporting monthly growth including both mining and construction which have been very strong and explain this report's relative strength compared to Markit's services PMI where growth has been less spectacular and which excludes these two industries.

Very solid growth looks to be in store for 2018 based on the January results of small sample surveys like those of ISM and Markit. The economy ended 2017 on a strong note and appears to have carried the momentum into 2018.

Recent History Of This Indicator:
The ISM non-manufacturing index has been cooling noticeably, moving down from the 60 area 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 to indicate solid monthly growth including new orders at 54.2, new export orders at 56.5, and employment at 56.3. Forecasters are calling for 56.2 in January.