ISM Service Sector Weighed Down By Drop in Employment
- ISM non-manufacturing composite slightly beats estimates at 59.5% vs 59.0% expected business activity jumps 3% while employment plummets 6%
- Respondents note higher prices along with shortage in supply
- The US Dollar Index traded slightly lower following today’s ISM report
TheInstitute for Supply Management (ISM) non-manufacturing survey reported that the non-manufacturing sector grew in February for the 97th consecutive month. The print came in at slightly above estimates at 59.5% versus 59.0% expected. Although, the services sector grew at a slightly lower rate in February than it did in January at 59.9%. ISM also reported that the Non-Manufacturing Business Activity Index rose to 62.8% percent, which is 3% percentage higher than the January reading of 59.8%, registering the 103rd consecutive month of consecutive growth.
Contrarily, the Employment Index fell 6.6% in February to 55% from the January at 61.6%. Finally, the Prices Index fell as well but by only 0.9% from the January reading of 61.9%.February marks the 24th consecutive month that prices rose according to the index.
In all, sixteen non-manufacturing industries reported growth in last month. This included educational Services, transportation & warehousing,utilities, real estate,rental & leasing, wholesale trade, finance & insurance,among others. ISM also stated that the large drop-off in the employment index hindered a stronger reading in the headline composite figure of 59.5%. They added,“the majority of respondents’ continue to be positive about business conditions and the economy."
Here are some notable responses from the ISM survey:
- "Lumber-related costs continue to increase as supply is also starting to become a problem. The market volatility of construction materials and the short supply of construction labor have added difficulty to long-term planning." (Construction)
- "Slight increase in activity; beginning to see some higher cost for goods and services." (Finance & Insurance)
- "Price of oil is increasing, which will have a trickle-down effect on our business. As the major oil and gas companies increase their activity, our business will increase with a bit of a lag." (Mining)
- "Business outlook is picking up momentum due to the state of the stock-market and recent tax breaks. More investment into corporation CapEx funds." (Retail Trade)
See the full non-manufacturing and manufacturing survey results below:
Below is a list of economic releases that has driven the US Dollar slightly lower:
- USD ISM Non-Manufacturing/Services Composite (FEB): 59.5 versus 59.0 expected, from 59.9 (revised higher from 55.9 previous)
- USD Markit US Services PMI (FEB F): 55.9K in line with expectations and previous
- USD Markit US Composite PMI (JAN F): 55.8k, from 55.9k previous
Chart 1: DXY Index 15-minute Chart (February 28 - March 5, 2018)
The US Dollar Index barely moved following the lackluster ISM print. DXY has traded in a narrow range between 89.86 and 90.21. This came as a result of President Trump’s announcement to impose tariffs on steel and aluminum imports. And as trade tensions heighten so too does volatility as we have seen. At time that this written DXY traded at 90.07
--- Written by Dylan Jusino, DailyFX Research
DailyFX provides forex news and technical analysis on the trends that influence the global currency markets.