While the COVID-19 pandemic continues to cast shadows over the global economy, the U.S. non-manufacturing sector has emerged as a beacon of resilience and vitality. The latest data from the Institute for Supply Management (ISM) reveals an unexpectedly robust performance that defies current economic challenges.
Strong Growth Indicators
The ISM's Non-Manufacturing Report on Business for February shows the sector's activity index (NMI) reached 57.3 , a significant 1.8-point increase from January's 55.5 reading. This figure not only surpasses the 50-point threshold that separates expansion from contraction but also exceeds the 12-month average of 55.3.
This marks the 121st consecutive month of expansion for the sector, demonstrating remarkable staying power through various economic cycles. The sustained growth suggests deep-rooted strength in service-oriented businesses that form the backbone of the U.S. economy.
Broad-Based Sector Performance
Growth was widespread across industries, with 16 of 18 non-manufacturing sectors reporting expansion. Leading performers included:
- Accommodation and food services
- Finance and insurance
- Real estate and leasing
- Healthcare and social assistance
- Professional, scientific, and technical services
- Transportation and warehousing
Only two sectors - arts/entertainment/recreation and agriculture/forestry/fishing/hunting - showed contraction, indicating the overall strength of the non-manufacturing economy.
Key Metrics Analysis
The report highlights several positive indicators:
- New orders surged 6.9 points to 63.1, reaching the highest level since June 2018
- Employment grew 2.5 points to 55.6, marking 72 straight months of expansion
- Business activity remained strong at 57.8 despite a slight 3.1-point decrease
- Inventories rebounded sharply, rising 7.4 points to 53.9
While supplier deliveries slowed slightly (52.4 from 51.7) and price increases moderated (down 4.7 points to 50.8), these metrics remain within healthy ranges.
COVID-19 Impact Assessment
ISM members expressed measured concern about pandemic-related disruptions, particularly in supply chains. Tony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee, noted that while the virus has created uncertainty, its domestic impact remains limited.
"It has affected supplier routes, especially from Asia," Nieves commented, "but so far hasn't disrupted the reported numbers. The uncertainty and fear factor are causing concern, but we need to keep this in proper perspective given the relatively low number of domestic cases."
The report suggests that while businesses are monitoring the situation closely, the sector's fundamentals remain strong. Nieves praised the Federal Reserve's recent 50-basis-point rate cut as a positive move to maintain U.S. competitiveness amid global economic stimulus measures.
Future Outlook
With new orders at near-record levels and employment continuing to grow, the non-manufacturing sector appears well-positioned for sustained expansion. Nieves emphasized that business conditions have exceeded expectations so far this year, with January performance remaining strong despite typical post-holiday slowdowns.
"If COVID-19 concerns subside and consumer confidence remains high," Nieves stated, "this would create a solid foundation for continued non-manufacturing growth."
The report concludes that while businesses must remain vigilant about pandemic-related risks, the U.S. non-manufacturing sector has demonstrated remarkable resilience and continues to show robust growth across most indicators.