The Business Services sector (one of the Zacks 16 sectors) covers an array of services including marketing, consulting, staffing, security, telecommunications, Internet services, logistics and waste handling. Thus, the outlook of the business services sector is firmly tied to the broader economy.
The Trump administration’s business-friendly approach, a strong U.S. economy, reduced tax rates, robust manufacturing activity and improvements in the labor market are currently major positives for the sector.
What’s Going in Favor of Business Services Sector?
Tax Cuts, Trump Administration’s Efforts to Boost Sector
The Trump administration remains focused on improving the ease of doing business as evident from the recent tax cuts. The historic overhaul of the tax structure to reduce tax liabilities from 35% to 21% has boosted corporate earnings, increased investments and in some instances also reflected in employee rewards. In addition, Trump’s pledge to spend $1 trillion on infrastructure projects over a period of 10 years and regulatory rollbacks remain tailwinds.
Employment and Manufacturing and Non-Manufacturing Activity
The employment index registered a growth of 57.3% in March which indicates employment growth in March for the 18th consecutive month. Of the 18 manufacturing industries, 12 reported employment growth. The increase came as companies are gearing up to hire more skilled workers and indirect personnel.
Economic activity in the manufacturing sector expanded in March and the overall economy grew for the 107th consecutive month. U.S. manufacturing activity continued its robust performance in March as the PMI measured by ISM touched 59.3%. This indicates strong growth in manufacturing for the 19th consecutive month, led by continued expansion in new orders, production activity, employment, and inventories, with suppliers continuing to struggle delivering to demand. Of the 18 manufacturing industries, 17 reported growth in March.