Service Sector Growth Continued in February

By SBE Council at 3 March, 2023, 4:29 pm

by Raymond J. Keating –

According to the latest ISM Services PMI report, purchasing managers said the services sector of the U.S. economy expanded for the second straight month in February.

The services sector data contrasted sharply with the ISM Manufacturing PMI that pointed to manufacturing declining for the fourth consecutive month in February.

Coming in at 55.1 in February, the services PMI has grown in 32 of the last 33 months, except for December 2022.

In February, 13 service sectors reported growth, with four experiencing contraction.

Anthony Nieves, chair of the Institute for Supply Management Services Business Survey Committee, observed:

“Business Survey Committee respondents indicated that they are mostly positive about business conditions. Suppliers continue to improve their capacity and logistics, as evidenced by faster deliveries. The employment picture has improved for some industries, despite the tight labor market. Several industries reported continued downsizing.”

While this comment leaned in a generally positive direction, when looking at the dozen industry comments highlighted in the ISM release, there’s a good deal to feed concerns.

Indeed, it would seem that they point more negative than positive, with mentions of “economic headwinds”; “Costs continue to escalate, eliminating any profit we had hoped for in the first and second quarters”; “Inflation, though somewhat eased from the peaks of the past six months, continues to drive higher-pricing demands from suppliers”; “Seeing a slow decline in activity, but not a collapse like in 2009”; and so on.

The economy remains in a precarious position. Some sectors and regions are experiencing growth, while others confront declines. The threat of inflation still looms, and overall economic growth seems sluggish, at best, with the threat of another recession lurking. For good measure, a tight labor market appears to becoming the rule.

Finally, pro-growth, pro-opportunity policymaking seems to have taken a backseat, at best, to those on the Left pushing anti-growth tax and regulatory measures, and among populists more concerned about waging some kind of culture war, including on various businesses, such as so-called “Big Tech,” M&A activity in general, the financial industry, and across-the-board intrusive labor regulation that would impact all sectors.

Raymond J. Keating is chief economist for the Small Business & Entrepreneurship Council. His latest book is The Weekly Economist: 52 Quick Reads to Help You Think Like an Economist.