Implications: A very solid, plow horse-like, report on the service sector today as the ISM non-manufacturing index showed expansion for the 37th consecutive month, slightly beating consensus expectations, coming in at 55.2. Although the new orders sub-index and the business activity sub-index – which has a stronger correlation with economic growth than the overall index – declined in January, they still remain at healthy levels. The biggest surprise from today's report was that the employment sub-index surged again in January coming in at 57.5, the best reading since February 2006. This is a good sign for the economy moving forward. On the inflation front, the prices paid index rose to 58.0 and remains elevated. Given the loose stance of monetary policy, inflation should continue to move higher over the coming years. Today's report, along with other data we have received this week, show the economy is doing just fine and will continue to plow ahead through 2013.
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