ISM services, continuing to carry the US economy

The February ISM services index rose to 53.5 from 52.8 and 1 pt better than expected and vs 54 in December and is about right in line with the 6 month average of 53.9. Business activity though was little changed at 54.4 vs 54.5 in January and 2.1 pts below its 6 month average.

New orders rose .9 pts to 52.2 after dropping by 3.1 pts last month. Backlogs jumped by 6.9 pts, finally getting back above 50 at 51.7. Inventories too got back above 50 at 50.6, up 3.1 pts m/o/m. After ADP and ahead of the BLS jobs report, the employment component rose 1.6 pts m/o/m to 53.9. Supplier deliveries (higher figure means slower supply chain and vice versa), rose to 53.4 from 53 and that is a 4 month high. Prices paid was up 2.2 pts to 62.6 and just above the 6 month average of 60.7. Of 18 industries asked, 16 said they paid higher prices vs 15 in the two prior months.

Industry breadth was similar to that seen in January where 14 sectors saw growth and 3 saw a contraction and one saw no change.

The respondent comments were littered with tariff talk as was Monday’s ISM and there were a few DOGE related comments for those in the public sector. The bottom line from the ISM, while US services is still in positive territory, “Anxiety continues however over the potential impact of tariffs. Some respondents indicated that federal spending cuts are having negative impacts on their business forecasts.”