ISM SERVICES KEY POINTS:
- ISM Services PMI slows to 55.1 from 55.2, topping expectations calling for a larger pullback to 54.5
- The new orders and the employment indices extend their recovery, prices paid move down moderately
- U.S. dollar, as measured by the DXY index, trims session losses amid economic resilience
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A gauge of U.S. business services activity was virtually unchanged in February following an unexpected rebound at the start of the year, a sign that the economy remains extremely resilient despite rapidly rising interest rates and persistently high inflationary pressures.
According to the Institute for Supply Management (ISM), its services PMI index eased to 55.1 this month from 55.2 in January, topping consensus estimates calling for a larger pullback to 54.5. For general context, any value above the 50 threshold indicates growth in the sector, while readings below that level denote contraction.
ISM SERVICES PMI AT A GLANCE
Source: DailyFX Economic Calendar
Looking under the hood, the non-manufacturing sector was supported by strength in the new orders and employment indices, with the former climbing to 62.6 from 60.4 and the latter advancing to 54.00 from 50.00 previously. Meanwhile, prices paid prolonged their retrenchment, sliding to 65.6 from 67.8, indicating movement toward equilibrium, a welcome development for the Federal Reserve
ISM SERVICES PMI CHART
Immediately after the survey results crossed the wires, the U.S. dollar, as measured by the DXY index, trimmed some session’s losses, as Treasury yields attempted to rebound, but the move wasn’t entirely sustained.
While better-than-expected activity figures suggest that demand conditions remain strong, the slide in prices paid signals that the situation will not be extremely inflationary for the time being, but more data will be needed to make a definitive assessment. With that said, attention will now turn to the February U.S. employment survey, which will be released next Friday. This report should be the next important volatility catalyst in the FX space.