The Institute for Supply Management (ISM), a Tempe-Arizona-based trade group, has within the past hour released upbeat data on the services sector, a critical economic zone, which accounts for some two-thirds of aggregate economic activity across the United States.

Specifically, the ISM, which last week issued some rather pedestrian results on manufacturing across the nation, noted today that non-manufacturing activity had risen to a level of 57.3 in February. That was modestly ahead of the 56.8 level recorded in January, and moderately better than the 56.0 level that was the consensus forecast for last month. It should be noted that a reading above 50.0 is consistent with an expanding non-manufacturing sector.

The ISM compiles its index by surveying more than 370 purchasing managers in some 62 services industries across the country once a month. The responses chronicle the level of optimism, or pessimism, by these purchasing managers versus the prior month.

As for the survey, itself, the results were the best since last February, a 12-month period that had seen the index range from a monthly low of 52.6 in September, October, and November, to a high of 56.8 in January of this year. Overall, this was the 26th consecutive month in which this survey had registered an expansionary reading above 50.0.

Meanwhile, in addition to the composite reading of 57.3, the survey also showed accelerating activity increases in such individual components as business activity and production, which increased from a reading of 59.5 in January to 62.6 last month. Also, we saw increases in new orders, which jumped from a January survey result of 59.4 to 61.2 in February. Elsewhere, the rate of employment eased from a growth rate of 57.4 to one of 55.7. The only area that saw an outright contraction, meantime, was supplier deliveries, which backtracked from 51.0 to 49.5. Large gains also were observed in backlogs and pricing, with some inflationary pressures now starting to be noted.

As to individual respondents, we saw purchasing managers in the information area saying that growth continues in that sphere, with market conditions improving dramatically. Health care noted that while business was generally flat last month, it was starting to show some improvement. In the professional and technical area, respondents indicated that optimism was all around, while others in wholesale trade noted that demand has been gradually improving.

Overall, then, this was a solid report, and should help to assuage some of the disappointment shown after the release of the manufacturing survey by the ISM last week. This data series also strengthens our case that growth in GDP could well approach the 2.5% level in the current three months.    

At the time of this article’s writing, the author did not have positions in any of the companies mentioned.