Confidence Remains Muted, Service Sector Strong, Measure of Inflation Decelerates Further

- Final Univ. of Mich. Consumer Confidence for February fell to 86.7 versus estimates of 87.5 and a prior estimate of 87.4.
- ISM Non-Manufacturing for February rose to 60.1 versus estimates of 58.0 and a reading of 56.8 in January.

BOTTOM LINE: Confidence among US consumers fell for a second month in February, Bloomberg reported. The expectations component of the index, a gauge of future spending, rose to 74.5 from a prior estimate of 74.4. I still expect consumer sentiment to reach cycle highs later this year as stock prices rise, housing stabilizes at more healthy sustainable levels, the job market remains firm, energy prices fall, irrational pessimism lifts further, long-term rates remain relatively low and inflation decelerates.

Growth in US services industries accelerated in February as consumer and corporate spending bolstered the largest part of the economy, Bloomberg said. Service companies are benefiting from strong economic growth as a result of the best consumer spending in six months in January and increasing equipment sales. The order backlog component of the index increased to 54 versus 52.5 the prior month. The employment component of the index surged to 58.2, the highest in 6 months. The prices paid component of the index fell to 64.8 and is now down 17.3% since September of last year. I expect the ISM Non-manufacturing index to fall modestly over the intermediate-term, but remain at healthy levls.