Three of the five District Bank surveys for the service sector point to at solid increase in activity while two suggest more moderate expansionary conditions in February. There’s no hint that growth in non-manufacturing is anything but positive, just that it may be somewhat softer in a couple of regions.
The two surveys that have the strongest correlation with the ISM Non-Manufacturing Index moved in different directions in February. The Richmond Fed’s index for service sector revenues – the report has no headline activity index – rose sharply to 26 in February after 10 in January. This regional data has the best correlation with the ISM number (0.828) and could sign an uptick from the 55.5 in the January national report. The Dallas Fed’s general business activity index dipped to 7.0 in February from 11.1 in January but is still the third highest in over a year. Its correlation with the ISM index is less solid (0.774) than Richmond’s but it is still good enough to be given heed.
The New York Fed’s business activity index rose to 9.8 in February after 3.7 in January. The Philadelphia Fed’s non-manufacturing index jumped to 31.0 after 13.4. The Kansas City Fed’s composite services index fell 8 points to 6 and was its weakest in five months. However, all three reports were consistent with continued expansion. The ISM Non-Manufacturing Index is set to add another month to the 120 month string of expansionary readings even as its cousin for the factory sector emerges from a downturn.
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