The Institute for Supply Management (ISM) released its February Services Purchasing Managers' Index (PMI), with the headline composite index at 53.5—above the forecast of 52.5. This marks the eighth consecutive month of expansion despite anxieties over tariffs and federal spending cuts.
Here is an excerpt from the report summary:
Miller continues, “February was the third month in a row with all four subindexes that directly factor into the Services PMI® — Business Activity, New Orders, Employment and Supplier Deliveries — in expansion territory, the first time this has happened since May 2022. Slightly slower growth in the Business Activity Index was more than offset by growth in the other three subindexes. Anxiety continues; however, over the potential impact of tariffs. Some respondents indicated that federal spending cuts are having negative impacts on their business forecasts.”
Here is a table showing the PMI's components.
Unlike its much older kin, the ISM manufacturing series, there is relatively little history for ISM's non-manufacturing data, especially for the headline composite Index, which dates from 2008. The chart below shows the non-manufacturing composite.
The more interesting and useful sub-component is the non-manufacturing business activity Index. The latest data point for February is 54.4, down from the previous month.
For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualize the short-term trends.
Theoretically, this indicator should become more useful as the time frame of its coverage expands. Manufacturing may be a more sensitive barometer than non-manufacturing activity, but we are increasingly a services-oriented economy, which explains our intention to keep this series on the radar.
ISM PMI Comparison: Manufacturing vs. Services
The next chart offers a comparison between the two Purchasing Managers' Indexes provided by the Institute for Supply Management. See the latest update on the Manufacturing PMI here.
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