Districts reporting on nonfinancial services generally indicated an upward trend in activity, although in some areas reports were mixed. Boston reported widespread positive activity in advertising, consulting, private equity firms, healthcare, biotechnology, education, and government services. High-tech service firms reported favorable conditions in Kansas City. New York reported a general pickup in activity. Health care providers reported increased demand in the San Francisco District, while professional services, especially advertising and accounting weakened. The Minneapolis District also reported mixed results across sectors, while activity in the Richmond District was generally down. Hiring through staffing firms was reported up in New York, Cleveland, Chicago, and Dallas with office and health care workers in greatest demand. Direct firm hiring was reported up in the St. Louis District, flat in Dallas, flat to down in New York, and down in Richmond.Among the five Districts reporting on transportation services, activity was mostly up slightly, or mixed. Freight shipping volumes were up slightly in the Atlanta, Cleveland, and Dallas Districts, while Kansas City reported a slight slowdown in activity. The Richmond District's port activity gained from increased international trade, especially imports of high-end vehicles, but intermodal firms in the Dallas District reported that imports dropped and exports flattened producing no increase in cargo volumes. Dallas also reported continued declines in rail cargo volume.
Here is a chart of the ISM non-manufacturing index:
This number bottomed in the Spring but has been rising steadily since.
Let's take a look at some of the comments from the latest ISM non-manufacturing report:
- "Economy seems to have leveled off with expectation of an upswing in our business in Q1 2010." (Professional, Scientific & Technical Services)
- "There has been a slight upturn in our business activities; however, it is not entirely attributable to any one particular source." (Public Administration)
- "The environment seems to be improving, but we will continue to be cautious as we look forward." (Retail Trade)
- "The current economic conditions are continuing to have a flat or negative effect on our business." (Wholesale Trade)
- "No items in short supply; suppliers looking to set up agreements for 2010 with quarterly or semiannual price reviews." (Arts, Entertainment & Recreation)
The report includes comments that area illustrative of the overall sample. Note the top three indicate a cautiously optimistic outlook. It indicates that survey respondents are feeling a bit better -- although it is clear no one thinks we are out of the woods.
Let's take a look at manufacturing:
Manufacturing activity has improved since the last report in six Districts. New York reported a general pickup in activity, broad optimism, and some increase in employment. Production was stable or slightly up in the Cleveland District. Firms in the Cleveland District expect greater export opportunities going forward, but steel firms expect slow growth in overall demand. Manufacturers in the Chicago District cited gains at firms tied to the auto industry and those benefiting from an increase in exports to Asia. Firms in the Boston District also cited Asian exports as well as defense work as sources of their positive demand, but identified weak demand for exports to Europe and for products related to energy sectors and commercial construction. San Francisco reported a modest net improvement in manufacturing activity, with semiconductors strengthening and aircraft and parts stabilizing at moderate levels. Metal fabricators and housing products have also stabilized, but at very low levels.Three Districts reported mixed results for manufacturing. Food products, furniture, and chemical firms reported slight increases in the Philadelphia District while other manufacturing sectors continued to decline. Dallas reported strength in high-tech and corrugated packaging, seasonal increases in food producers, little change in fabricated metals and petrochemicals, seasonal decreases in aircraft components, and weaknesses in emergency vehicles and construction-related manufacturing. The Minneapolis District reported manufacturing activity up in Minnesota, but down in the Dakotas based on a recent survey of new orders.
Manufacturing activity was weak in the other Districts. Richmond reported widespread weakness across shipments, new orders, and employment within its manufacturing sector and Atlanta saw orders and production drop back after an increase in November. The St. Louis District reported a continued decline in activity, persistent weakness in employment, and plant closings, on net.
Manufacturers' expectations for the near future as reported from the Boston, Chicago, Cleveland, Kansas City, New York, and Philadelphia Districts were all optimistic, although Kansas City firms were less optimistic than the last report. Capital spending plans remained more cautious. Only Boston and Philadelphia reported that firms were planning to increase capital spending in the current year. Cleveland, Chicago, and Kansas City reported expectations of continued modest spending.
Manufacturing has been one of the pleasant surprises of the recovery. After nearly collapsing at the end of 2008 it has come back into an expansionary stance. This is partly attributable to Asia coming back on line quickly as US exports have been increasing:
While the overall trade deficit is again increasing, it's important to note that overall, exports have increased pretty strongly since the spring.
The latest ISM manufacturing reading was very strong:
Note the number is now back to pre-recession levels. 
Industrial production has rebounded, as has
Capacity utilization.
Manufacturing is clearly on the mend.
