Economy Watch: U.S. Service Sector Still Expanding

Economic activity in the non-manufacturing sector grew in February for the 86th consecutive month, according to the latest Non-Manufacturing ISM Report On Business.
Janet Yellen, Chair of the Board of Governors of the Federal Reserve System
Janet Yellen, Chair of the Board of Governors of the Federal Reserve System

The service sector, which represents well over half of U.S. economic activity, is still humming along. Economic activity in the non-manufacturing sector grew in February for the 86th consecutive month, according to U.S. purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business, which was released on Friday.

The Non-Manufacturing Index came in at 57.6 percent in February, which is 1.1 percentage points higher than in January, and the highest reading since October 2015, meaning the expansion was slightly more robust than the previous month. Likewise, the Non-Manufacturing Business Activity Index increased to 63.6 percent, 3.3 percentage points higher than in January, and the highest reading since February 2011. The Employment Index increased 0.5 percentage points in February to 55.2 percent. All of the indexes point to expansion (which indicate a reading o 50 or above).

Also on Friday, Federal Reserve Chair Janet Yellen gave a speech in Chicago. “[W]e currently judge that it will be appropriate to gradually increase the federal funds rate if the economic data continue to come in about as we expect,” she said. “Indeed, at our meeting later this month, the committee will evaluate whether employment and inflation are continuing to evolve in line with our expectations, in which case a further adjustment of the federal funds rate would likely be appropriate.”

Though central bankers never promise anything absolutely, that’s about as close as one can get to a promise that the Fed will hike interest rates soon. The next meeting of the Federal Open Market Committee is later this month.