ISM non-manufacturing PMI still robust in February, despite weaker pricing trends

  • Economic Indicators News
ISM non-manufacturing PMI still robust in February, despite weaker pricing trends
Credit: © Reuters.

By Geoffrey Smith -- A key gauge of U.S. economic activity showed business was still robust in February, but suggested that companies are fast losing their pricing power as inflation squeezes household and corporate budgets.

The non-manufacturing index compiled by the Institute of Supply Management inched down to 55.1 from 55.2 in January but remained well above the 50 level that typically separates growth from contraction.

EY chief economist Greg Daco said the numbers were "a solid surprise to the upside"

However, the prices paid component of the index fell more clearly to 65.6 - its lowest level in two years - from 67.8 in January, as survey respondents highlighted increased cost-consciousness in the retail and wholesale trades.

"Continual effort to right-size inventory to match lower sales forecasts for the coming year," the ISM cited one retail respondent as saying.

One respondent from the wholesale trade noted, meanwhile that: "Customers now are very cost conscious and looking for lower-priced product options,” in an echo of various retailers' quarterly reports over the last few weeks. Walmart (NYSE: WMT ), in particular, had drawn attention to customers 'trading down' as lower-income segments struggled to make ends meet, having run down their pandemic-era savings.

The picture wasn't uniform. Respondents from finance complained that costs are "still elevated," while construction companies noted that continued cost inflation was eating badly into profit margins.

Other parts of the survey showed that new orders rose for a second straight month, after contracting for the first time since the pandemic in December.

Crucially, however, there was no sign of the labor market slowing down despite ongoing layoffs at technology companies. The employment subindex rose to 54.0 from 50.0, notching its highest level since April. Given that the survey covers the sectors that account for most U.S. job growth, that sets the stage for another strong labor market report next Friday.

Drop an image here or Supported formats: *.jpg, *.png, *.gif up to 5mb

Error: File type not supported

Drop an image here or


Related Articles