US Services Sector Shoots Up in February, Transportation Services among industries reporting growth



Commentary:

The Institute for Supply Management issued its Non-Manufacturing index for February which came in at 53% - up from 50.5% and its highest reading in nearly two years. The index provides a business barometer for the non-manufacturing segment of the economy. Looking beneath the numbers, there is a story of “cautious recovery” beginning across much of the country.

Special Note:
The Institute for Supply Management reported that the key segments showing increases in the February included (in order of growth):

• Information;
• Arts, Entertainment & Recreation;
• Transportation & Warehousing;
• Public Administration;
• Professional, Scientific & Technical Services;
• Other Services;
• Retail Trade;
• Wholesale Trade;
• Finance & Insurance

The Business Activity Index and New Orders were both up as well. Note: any reading over 50 indicates that the industry is expanding – the higher the number over a score of 50 – the higher the growth rate.

Freight Transportation:
The non-manufacturing ISM Report on Business showed that transportation was one of the industries reporting increases in activity in the month. This increase in activity was generally a result of the rebuilding of inventories by companies spanning retail, manufacturing, and wholesale distribution.

But, with the automotive, airline, and general merchandise industries showing improvement in the first portion of 2010, there is a real correlation between the uptick in activity that is being reported by the transportation industry and the impact it had on the ISM index. In other words, we are now getting triangulation on growth stats for the industry – and can say that it is legitimately on track to improve each month.

That could affect capacity (tighten it) and make prices increase slightly as a result for shippers that are looking to rebuild inventories.

Passenger Transportation:
There was very little in the report that would suggest to us that passenger transportation would see a significant increase in activity as a result of the improvement in the index. However, common reasoning would suggest to us that as businesses in the services sector once again begin to hire, that the amount of commuter traffic will increase as well.

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