ISM Non-Manufacturing Sample Shows Sustainable And Solid Growth

ISM's non-manufacturing sample reports sustainable and solid growth, at 56.7 in January which is near Econoday's consensus for 57.1 though nearly 1 point lower than December. Yet readings are very favorable, pointing to still healthy order growth and only slight pressures on delivery times.

New orders did slip 5 points but at 57.7 remain very strong and with backlogs building, up 2 points to 52.5. Barely over 50, however, are new export orders in a signal of easing foreign demand as also indicated by the services PMI released earlier this morning.

But other areas of softness are limited with the sample increasing hiring, up 1.2 points to 57.8, with business activity remaining very brisk at 59.7 though down 1.2 points from December. Supplier deliveries are steady for a second month showing only modest pressure at 51.5 though input costs, unlike other surveys, did not ease from lower fuel prices but remain elevated at 59.4.

One sign of possible trouble is the split between industries reporting composite growth in the month vs contraction, at 11 to 7 in the January report which is narrower than prior reports. Growth is led by transportation & warehousing with retailers and educational providers reporting the most contraction.

Yet a little easing can be a good thing and overall rates of growth for both this sample and the services PMI sample remain healthy and favorable and consistent with solid and sustainable GDP growth.