"The NMI (Non-Manufacturing Index) registered 50.5 percent in January, 0.7 percentage point higher than the seasonally adjusted 49.8 percent registered in December, indicating growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased 1 percentage point to 52.2 percent, reflecting growth for the second consecutive month. The New Orders Index increased 2.7 percentage points to 54.7 percent, and the Employment Index increased 1 percentage point to 44.6 percent. The Prices Index increased 1.6 percentage points to 61.2 percent in January, indicating an increase in prices paid from December. According to the NMI, four non-manufacturing industries reported growth in January. Respondents' comments overall are cautiously optimistic about business conditions."
Here is a chart of the relevant data:
Notice the reading has been right at the expansion/non-expansion level for the last 5 months. The index has not been able to get meaningfully above this number. That indicates that while there is an expansion, it is weak. This is born out by the following points from the report:
The four industries reporting growth in January based on the NMI composite index are: Other Services; Utilities; Information; and Wholesale Trade. The 11 industries reporting contraction in January — listed in order — are: Arts, Entertainment & Recreation; Mining; Retail Trade; Transportation & Warehousing; Management of Companies & Support Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; Finance & Insurance; Educational Services; Public Administration; and Accommodation & Food Services.
The majority of industries are still contracting. That means the four growing industries are offsetting 11 poorly performing industries. Ideally, we'd like to see that number reversed.
However, consider this from the report:
The eight industries reporting growth of new orders in January — listed in order — are: Construction; Information; Wholesale Trade; Other Services; Utilities; Accommodation & Food Services; Educational Services; and Health Care & Social Assistance. The eight industries reporting contraction of new orders in January — listed in order — are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Retail Trade; Mining; Finance & Insurance; Transportation & Warehousing; Professional, Scientific & Technical Services; and Public Administration.
The number of industries with an increase in new orders are even -- half are reporting increases and half are reporting decreases. Hopefully that means we'll start to see a broader based service sector expansion in the next few month.
