econoFACTS
An analysis of the latest economic data
March 3, 2017, 10:00 am
U.S. Institute for Supply Management Nonmanufacturing Index — Feb.
Nonmanufacturing On a Roll
Jennifer Lee, Senior Economist • [email protected] • 416-359-4092
The Bottom Line: It is difficult to imagine that the Fed Chair’s tone during this
afternoon’s speech—the final one before the blackout period begins—will waver too
much from that of her counterparts over the past week. And, today’s report on
nonmanufacturing activity will bolster that view. However, given January PCE and
the wider goods trade deficit, there remains downside risk to our Q1 growth estimate
of 2.2%. The second quarter is another story.
The U.S. non-manufacturing ISM index beat expectations with its 1.1 pt move up
in February to 57.6, the highest since October 2015. Key for next week was the fact
that the employment component rose for the 2nd month in a row, up 0.5 pts to a 3month high of 55.2. That helps confirm our expectation that nonfarm payrolls rose by
about 200,000 last month (we’ll find out on March 10th). But don’t forget; labor
shortages……such as those in the construction industry….will have the negative
effect of slowing the hiring process at some point, if it hasn’t already.
As for the other 3 components (all weighing in at 25% each), new orders hit a 19month high of 61.2, and business activity hit a 6-year high of 63.6…..this bodes well
for current and future activity. And there were fewer supplier delivery delays, which
offset the strength in the other components.
There’s more good news……
Of the 18 industries in the survey, 16 reported growth, up from 12 last month and the
highest since October 2014. And here’s what they said:
 "Our business remains strong." (Health Care & Social Assistance)
 "Business has been consistent for the start of 2017." (Management of Companies
& Support Services)
 "U.S. construction labor is tight." (Construction)
 "Lending has picked up quite nicely." (Finance
& Insurance)
 "Strong 1st quarter for our industry shows
promise for 2017." (Mining)
 "Heavy rains and continuing storms have
affected the quality and availability of greens
and lettuces in California. Prices have also
increased. Product yield has also declined,
specifically for heartier greens."
(Accommodation & Food Services)
 "Oil prices have stabilized, but not at a level
that drives significant increases in capital
ISM Nonmanufacturing Index
United States (percent reporting)
Nonmanufacturing ISM
Feb
57.6
Jan
56.5
Dec
56.6
16Q4
55.8
16Q3 Feb 16
54.4
54.3
Business Activity
63.6
60.3
60.9
59.8
57.0
58.3
Employment
55.2
54.7
52.7
53.4
52.8
51.4
New Orders
61.2
58.6
60.7
58.6
56.7
56.8
Prices Paid
57.7
59.0
56.1
55.8
52.5
46.1
Backlog of Orders
(n.s.a.)
54.0
50.0
48.0
50.3
50.8
52.0
Supplier Deliveries
(n.s.a.)
50.5
52.5
52.0
51.5
51.2
50.5
New Export Orders
(n.s.a.)
57.0
48.0
53.0
55.2
52.8
53.5
A publication of BMO Capital Markets Economic Research • Douglas Porter, CFA, Chief Economist • economics.bmocapitalmarkets.com • 416-359-6372
econoFACTS
Page 2 of 2
March 3, 2017, 10:00 am
spending at oil and gas companies. Business activity has increased just slightly."
(Professional, Scientific & Technical Services)
 "Slow after the holiday. Positive year ahead." (Retail Trade)
"The dramatic improvement in business, which began in December continued into
January. Early February is showing similar results." (Wholesale Trade)
Baby spinach/arugula/swiss chard salad lovers may disagree, but those were very
encouraging statements. Interestingly, there were no comments about uncertainty
over the new occupants of the White House (there were two comments last month).
General Disclosure
“BMO Capital Markets” is a trade name used by the BMO Financial Group for the wholesale banking businesses of Bank of Montreal and its subsidiaries BMO Nesbitt Burns Inc., BMO Capital
Markets Limited in the U.K. and BMO Capital Markets Corp. in the U.S. BMO Nesbitt Burns Inc., BMO Capital Markets Limited and BMO Capital Markets Corp are affiliates. Bank of Montreal or its
subsidiaries (“BMO Financial Group”) has lending arrangements with, or provide other remunerated services to, many issuers covered by BMO Capital Markets. The opinions, estimates and
projections contained in this report are those of BMO Capital Markets as of the date of this report and are subject to change without notice. BMO Capital Markets endeavours to ensure that
the contents have been compiled or derived from sources that we believe are reliable and contain information and opinions that are accurate and complete. However, BMO Capital Markets
makes no representation or warranty, express or implied, in respect thereof, takes no responsibility for any errors and omissions contained herein and accepts no liability whatsoever for any
loss arising from any use of, or reliance on, this report or its contents. Information may be available to BMO Capital Markets or its affiliates that is not reflected in this report. The information
in this report is not intended to be used as the primary basis of investment decisions, and because of individual client objectives, should not be construed as advice designed to meet the
particular investment needs of any investor. This material is for information purposes only and is not an offer to sell or the solicitation of an offer to buy any security. BMO Capital Markets or
its affiliates will buy from or sell to customers the securities of issuers mentioned in this report on a principal basis. BMO Capital Markets or its affiliates, officers, directors or employees have
a long or short position in many of the securities discussed herein, related securities or in options, futures or other derivative instruments based thereon. The reader should assume that BMO
Capital Markets or its affiliates may have a conflict of interest and should not rely solely on this report in evaluating whether or not to buy or sell securities of issuers discussed herein.
Dissemination of Research
Our publications are disseminated via email and may also be available via our web site http://economics.bmocapitalmarkets.com. Please contact your BMO Financial Group Representative for
more information.
Conflict Statement
A general description of how BMO Financial Group identifies and manages conflicts of interest is contained in our public facing policy for managing conflicts of interest in connection with
investment research which is available at http://researchglobal.bmocapitalmarkets.com/Public/Conflict_Statement_Public.aspx.
ADDITIONAL INFORMATION IS AVAILABLE UPON REQUEST
BMO Financial Group (NYSE, TSX: BMO) is an integrated financial services provider offering a range of retail banking, wealth management, and investment and corporate banking products.
BMO serves Canadian retail clients through BMO Bank of Montreal and BMO Nesbitt Burns. In the United States, personal and commercial banking clients are served by BMO Harris Bank N.A.,
Member FDIC. Investment and corporate banking services are provided in Canada and the US through BMO Capital Markets. BMO Capital Markets is a trade name used by BMO Financial
Group for the wholesale banking businesses of Bank of Montreal, BMO Harris Bank N.A, BMO Ireland Plc, and Bank of Montreal (China) Co. Ltd. and the institutional broker dealer businesses
of BMO Capital Markets Corp. (Member SIPC), BMO Nesbitt Burns Securities Limited (Member SIPC) and BMO Capital Markets GKST Inc. (Member SIPC) in the U.S., BMO Nesbitt Burns Inc.
(Member Canadian Investor Protection Fund) in Canada, Europe and Asia, BMO Capital Markets Limited in Europe, Asia and Australia and BMO Advisors Private Limited in India.
“Nesbitt Burns” is a registered trademark of BMO Nesbitt Burns Inc., used under license. “BMO Capital Markets” is a trademark of Bank of Montreal, used under license. “BMO (M-Bar roundel
symbol)” is a registered trademark of Bank of Montreal, used under license.
® Registered trademark of Bank of Montreal in the United States, Canada and elsewhere.
™ Trademark Bank of Montreal in the United States and Canada.
© COPYRIGHT 2017 BMO CAPITAL MARKETS CORP.
A member of BMO Financial Group