ISM Non-Manufacturing Index Reaches New High

By John S. McClenahen Business activity in the service sector of the U.S. economy reached a record 65.7% in January on the Institute for Supply Management's (ISM) non-manufacturing index. New orders, order backlogs, employment, prices, imports and exports all increased last month -- although with the exception of new orders at a slower rate than in December. The 7.7 percentage point increase from December's index figure of 58% was nearly four times the 2 percentage point increase -- to 60% -- that most economists anticipated. Of the 17 industries included in the index, only construction reported a contraction in business activity from December 2003 to January 2004. Thirteen industries reported month-to-month growth and three were unchanged. "With the factory ISM at a 20-year high, the two surveys are signaling considerable strength in first-quarter [2004] growth," says UBS Investment Research, New York. "The message is that our 5% forecast for [first-quarter] GDP growth appears achievable."

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