"Non-manufacturing business activity increased for the 46th consecutive month in January," Nieves said. He added, "Business Activity increased at a faster rate in January than in December. New Orders and Employment increased at slower rates than in December. The Prices Index decreased 4.5 percentage points this month to 55.2 percent. Seven non-manufacturing industries reported increased activity in January. Members' comments in January are mostly positive concerning current business conditions. The overall indication in January is continued economic growth in the non-manufacturing sector at a faster pace than in December."
Let's look at the internals.
First, the overall index increased a few points. That doesn't hurt. But the increase was 2.3. In other words, it's a bit higher than last months survey.
But some of the internals aren't that solid. New orders decreased .2% and employment decrease 1.5%. New export orders decreased 6.5% and imports decreased 10%. These four numbers point to a slowdown, not an expansion. The backlog of orders increased 1%.
On the plus side, prices dropped 4.5%.
Here is the comments section from the report:
* "Revenue is better and costs are starting to come down — especially petroleum-related costs." (Agriculture, Forestry, Fishing & Hunting)
* "Activity continues to exceed plans." (Health Care & Social Assistance)
* "Our sales continue to lag behind expectations, causing plans for deeper cost-cutting measures." (Retail Trade)
* "2007 off to a brisk start!" (Utilities)
* "More requests for services, particularly offshoring." (Professional, Scientific & Technical Services)
Note the highlighted comment from the retail industry -- sales continue to lag. That indicates several points. First, the Census Bureau's new retail model is probably a bit off (still) and rill be revised downward in the next report. Secondly, it indicates the downtrend has been in place a bit longer than the time period of the report (the use of the word "continue").
Also note the offshoring activity is specifically mentioned. That means we may have a further drop in employment over the next few months -- or at least weaker growth.
Again -- while the overall index was up, the internals were down.