US February ISM services 55.3 vs 58.7 expected

February ISM services report

  • Prior was 58.7 (Highest since Feb 2019)
  • Prices paid 71.8 vs 64.2
  • New orders 51.9 vs 61.8 prior
  • Employment 52.7 vs 55.2 prior
More details:

  • backlog of orders 55.2 vs 50.9 prior
  • new export orders 57.6 vs 47.0 prior
  • imports 50.5 vs 53.5 prior
  • supplier deliveries 60.8 vs 57.8 prior
  • inventory change 58.9 vs 49.2 prior
  • inventory sentiment 54.3 vs 49.7 prior

The big drop in new orders contrasts with the rise in the backlog of orders and new export orders. This is a tough one to make sense of.

The lowest forecast was 57.0 and the market was undoubtedly looking for an upside surprise after the Markit survey.

Looking ahead, the misses in ADP employment and the employment component of this survey don’t bode well for non-farm payrolls.

Comments in the report:

  • “Suppliers are taking the opportunity with the commodity-price
    increases in the last few months to propose price increases that are
    above and beyond normal expectations, causing significant concern.
    Business growth remains optimistic on the emergence of a
    post-coronavirus [COVID-19] era in [the] second half of 2021. U.S. port
    delays are problematic.” (Accommodation & Food Services)
  • “The declining COVID-19 cases in the four states we operate in,
    combined with the increased vaccination rates, should bode well for our
    increased business activity moving into the second quarter of 2021.”
    (Arts, Entertainment & Recreation)
  • “Sales of residential real estate continue to be strong, even
    outstripping supply. Cost inflation in building materials seen as
    shortages develop from sporadic COVID-19 closures at manufacturing
    facilities. Port congestion on the West Coast [and] winter weather in
    Canada closing mills and restricting truck shipping are contributing to
    product shortages nationwide.” (Construction)
  • “COVID-19 restrictions continue to affect the number of students
    either applying to college, living on campus or finding alternative
    means of a valuable education. As such, revenues have decreased while
    expenses increased.” (Educational Services)
  • “Business is steady during Q1 2021.” (Finance & Insurance)
  • “Exponential demand for critical supplies due to [the] pandemic is
    driving distributer allocations and forcing alternative sourcing.”
    (Health Care & Social Assistance)
  • “Our company has an overall positive outlook, with new COVID-19
    cases trending down nationally and vaccine distribution coming online.
    However, possible changes to the regulatory environment for oil and gas
    is a looming negative influence.” (Management of Companies & Support
  • “The business continues to reduce real-estate/brick-and-mortar
    [operations] and transition to a work-from-home model. Innovation is the
    watchword in all things; as such, the need to right-size all
    consumption as patterns have changed.” (Information)
  • “Supplier deliveries continue to be an issue as well as lead-times.
    Additionally, price increases are occurring with more frequency for
    products containing raw materials such as copper and steel.” (Retail
  • “Construction and customer activity remains robust. Many materials
    have inconsistent lead times or are facing delivery delays.” (Utilities)
  • “We are seeing an ongoing influx of price increases due to
    raw-material shortages, labor shortages, and transportation delays.”
    (Wholesale Trade)
  • “We were excited [in January], when orders and activity were
    increasing. Now, they are not receding, but they’re flat month over
    month. That’s not the rebound we were hoping for.” (Professional,
    Scientific & Technical Services)

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