Despite slight decline, ISM non-manufacturing data gets off to strong start in January

Like its manufacturing brethren, non-manufacturing got off to a decent start in 2017, following a strong end to 2016, according to data issued today by the Institute for Supply Management.

The index ISM uses to measure non-manufacturing growth—known as the NMI—was 56.5 in January (a reading of 50 or higher indicates growth), which was down 0.1 percent from December, which is its highest level over the last 13 months, and remaining in growth mode for the 85th straight month.  The December NMI is 1.4 percent higher than the 12-month average of 55.1.  

Two of the report’s core four metrics, including the NMI, were up in January. Business activity/production fell 0.6 percent to 60.3, while growing for the last 90 months, and new orders dropped 2.1 percent to 58.6, also showing growth over the last 90 months. Employment saw a 2.0 percent increase, with growth intact over the last 35 months.

ISM said that 12 industries reported growth in January, including: Mining; Other Services; Utilities; Health Care & Social Assistance; Finance & Insurance; Public Administration; Accommodation & Food Services; Retail Trade; Construction; Wholesale Trade; Professional, Scientific & Technical Services; and Management of Companies & Support Services. The five industries reporting contraction in January are: Real Estate, Rental & Leasing; Educational Services; Transportation & Warehousing; Information; and Arts, Entertainment & Recreation.

Comments submitted in the report by ISM members were largely favorable in assessing market conditions. “Continued optimism concerning the business environment in the near term,” said a Management of Companies & Support Services respondent. A health care and social assistance respondent said that current conditions are stable, adding that there is uncertainty with the Trump presidency and how it is going to impact health care.

Other notable metrics in the report included: supplier deliveries staying at 52.5 (above 50 for this metric means it contracted); prices up 2.9 percent to 59.0;  backlog of orders up 2.0 percent at 50.0; and inventories down 4.0 percent to 48.0

Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, said that looking at the NMI, even with a slight slowing in new orders, which still had a strong month, January was very strong over all.

“It was hard to see how things were going to come in for January numbers-wise, especially in light of this real post-Election build up, with the stock market taking off for a bit,” he said. “It raised the question of ‘is this all real?’ What really surprised me was that non-manufacturing maintained strength, as there is usually a lull after the holidays. It bodes well as a good starting point for 2017.”

An uncertainty for some non-manufacturing sectors pertains to how the new Administration’s policies will impact them, he said, using health care as an example.