According to the ISM Services PMI report from the Institute for Supply Management, activity for February came in well above expectations, with the headline index increasing to 56.1 versus the 53.5 consensus (53.8 prior). A value above 50 reflects expansion in the services sector while a value below 50 represents a contraction. The New Orders Index was 58.6 (53.1 prior), signaling still expanding demand. The Employment Index slightly improved to 51.8 (50.3 prior) suggesting continued growth in service-sector hiring. Prices Paid came in at 63.0 (66.6 prior), a sign that cost pressures continue to remain elevated.
The ABA Office of the Chief Economist believes the data is pointing to continued strength in the services sector, a key driver of U.S. economic activity and recent gross domestic product growth. Sustained expansion could support Commercial and Industrial lending, particularly among service-oriented small and midsize businesses. Given the sector’s large share of the economy (~75% of GDP), continued growth may also reinforce consumer spending and support demand for consumer credit.
