 | ISM Services index rises to 59.7 in February |
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Implications: Great news all around on the economy today. The ISM non-manufacturing index increased to 59.7 in February, beating consensus expectations. Meanwhile, initial claims for unemployment insurance plummeted to 368,000, a two and one-half year low. The overall ISM services index hit another multi-year high in February, which shows the service sector is growing at a rapid rate. The business activity index, which has an even stronger correlation with real GDP growth, hit 66.9, the highest since 2005. On the inflation front, the prices paid index increased to 73.3. We expect this measure of price inflation to continue to move higher as the Federal Reserve clings to an overly loose monetary policy. It should be getting harder for the Fed to ignore clear inflation signals, but somehow it manages to discount these stubborn facts that the rest of us have to live with. The Fed is also not impressed with other signs of growth. The four-week moving average of initial unemployment claims fell to 389,000. Continuing claims for regular state benefits declined 59,000 to 3.77 million, and the ADP Employment index, a measure of private-sector payrolls, increased 217,000 in February. When all of this is taken together, it looks like the labor market is coming around. We expect the official Labor Department payroll figures will show a large acceleration when they arrive early tomorrow morning.
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