U.S. Services Gauge Tops Forecast in Sign of Economic Health

(Bloomberg) -- A gauge of U.S. service industries rebounded in February by more than forecast on strength in new orders, a sign the economy remains on relatively solid footing even with growth projected to cool this quarter.

The Institute for Supply Management’s non-manufacturing index rose 3 points to 59.7, the biggest gain in a year, the group’s data showed Tuesday. The increase, driven by 13-year highs in gauges of new orders and business activity, topped all but one estimate in a Bloomberg survey calling for a rise to 57.4. All 18 industries reported growth, ISM said.

U.S. Services Gauge Tops Forecast in Sign of Economic Health

Key Takeaways

  • Advances in three of the four index components signal that businesses remain optimistic about consumer demand for services and that the effects of the government shutdown are fading.
  • The report also indicates that continuing trade tensions and a dimming global-growth outlook aren’t weighing so much on service providers. An index of export orders rebounded from a two-year low while a gauge of imports fell to the lowest since 2017.
  • The employment gauge fell to an eight-month low, though remained at a historically elevated level. That followed ISM’s factory jobs gauge slumping to a two-year low in February. The Labor Department’s payrolls report Friday is forecast to show the pace of gains in nonfarm jobs eased last month.

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  • Service companies still face bottlenecks: a measure of backlogs showed they grew at a faster pace, while the gauge of supplier delivery times increased for the first time since October.
  • The prices gauge fell to 54.4, the lowest since June 2017. That followed ISM data for manufacturers showing that index of their prices paid fell to a three-year low and remained below 50 for a second-straight month.
  • ISM’s February factory index, issued Friday, declined to a two-year low as measures of orders, employment, production and deliveries all fell.

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