Summary
Earlier today, the Institute for Supply Management reported modest strengthening during February in its index that measures activity in the nation's service sector. While the index's price component registered a very small decline, it remained high by historical standards, indicating that cost pressures persist.
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The Institute for Supply Management's index measuring the economy's February service-sector activity came in at a reading of 59.8, up modestly from January's 58.2. Febuary's result was very much in line with a consensus forecast of around 60.0.
This series' most recent high was 66.9, occurring last April. The ISM's service-sector measure works in the same manner as ISM's manufacturing index: a reading above 50.0 indicates sector expansion.
Today's report showed a 0.2-point decline during February, to 66.4, in the index's price component. However, a 66.4 reading remains high by historical standards, indicating that overall service-sector price pressures persist. (The recent high recorded in this component was 73.6, registered in December.) February marked the 21st consecutive month of rising prices.
ISM reported a noticeable increase in February in the number of its survey respondents reporting higher prices -- 43%, versus 37% in January. Only 3% of respondents reported lower prices, while 54% reported prices that were unchanged. This compared with a 31%/9%/60% result in February of last year.
The "What Respondents Are Saying" section of today's ISM report contains the following comments:
* "Political and economic uncertainties in numerous countries globally are increasing business-related costs."
* "Higher material prices are a major concern, especially for plastics, steel and energy."
* "Some vendors are having difficulties holding their pricing on blanket orders past a year, due to fuels and rubber goods."
* "Overall business has improved this period over last year same period, both U.S. and globally."
* "Railroad transportation inefficiencies, fuel surcharges and rate increases are concerns."
The following table examines overall and price data over the last 12 months. (NOTE: December and prior data incorporate new US Department of Commerce seasonal-adjustment factors used by ISM. In this series, ISM does seasonally adjust the price data. It does not do so in its manufacturing index.)
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INSTITUTE FOR SUPPLY MANAGEMENT
NON-MANUFACTURING INDEX -- TOTAL
INDEX AND PRICE COMPONENT
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Respondents Reporting
Higher, Lower, or
Unchanged Prices
Month/ Overall Price ---------------------
Year Index Index Higher Lower Unch.
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02/05 59.8 66.4 43% 3% 54%
01/05 59.2 66.6 37% 4% 59%
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12/04 63.1 73.6 38% 5% 57%
11/04 61.3 73.2 38% 4% 58%
10/04 61.5 74.0 44% 3% 53%
09/04 58.7 68.8 35% 3% 62%
08/04 59.3 70.1 40% 4% 56%
07/04 63.4 72.4 45% 5% 50%
06/04 61.1 72.9 52% 3% 45%
05/04 63.3 72.0 55% 3% 42%
04/04 66.9 66.9 53% 3% 44%
03/04 64.0 64.8 43% 3% 54%
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Materials/Services Reported in Short Supply During February:
(NOTE: The number of consecutive months the commodity is listed is indicated after each item.)
Cement/Concrete/Cement Products; Roofing Materials; Roofing Shingles; Stainless Steel; and Steel (13).
Materials/Services Reported Up in Price During February:
Aluminum (14); Beef (3); Building Materials (2); Conveyor Belt/Products; Copper (18); Dairy Products*; #2 Diesel Fuel (2); Fuel (15); Gasoline* (15); Hotel Prices (3); Lumber including Pine, Spruce and Treated (2); Medical/Surgical Supplies/Equipment; Metals; Natural Gas (6); Office Supplies; Oil; Paper/Paper Products (13); Petroleum/Petroleum-Based Products; Plastic Bags (3); Plastic Items (2); Plastic Resin (3); Plastics (14); Polyethylene Products; Polypropylene; Pork/Pork Baby Back Ribs/Pork Trimmings (3); Poultry (2); PVC (2); Roofing Materials; Roofing Shingles (4); Stainless Steel (2); Stainless Steel Products; Steel (16); Steel Products (12); Tires; Transportation/Freight Charges (10); and Unleaded Gasoline.
Materials/Services Reported Down in Price During February:
Computer Hardware (5); Dairy*; and Gasoline* (3).
*Reported as both up and down in price.
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