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Economy in Brief

ISM Non-Manufacturing Index Recovered, Employment Index Down Sharply
by Tom Moeller August 4, 2004

The Institute for Supply Management reported that its Business Activity Index for the non-manufacturing sector rose last month to 64.8 versus 59.9 in June. Consensus expectations had been for a lesser rise to 62.0.

Since the series' inception in 1997 there has been a 60% correlation between the Business Activity Index and the q/q change in GDP services plus construction.

The new orders index jumped to a record high of 66.4, up 4.0 points from June and up 8.3 points from the 2003 average.

The employment index fell a sharp 7.4 points from the June record to the lowest level since last September. Nevertheless, higher employment was reported by 18% of firms, down from 27% in June but up versus 17% last year.

Since the series' inception in 1997 there has been a 60% correlation between the level of the ISM non-manufacturing employment index and the m/m change in payroll employment in the service producing and construction industries.

Business activity for the non-manufacturing sector is a question separate from the subgroups mentioned above. In contrast, the NAPM manufacturing sector composite index is a weighted average five components.

The seasonally adjusted prices index slipped to 73.1 from the record high in June.

ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The non-manufacturing survey dates only to July 1997, therefore its seasonal adjustment should be viewed tentatively.

ISM Non-manufacturing Survey July June July '03 2003 2002 2001
Business Activity Index 64.8 59.9 64.1 58.1 55.1 48.9
Prices Index 73.1 74.6 52.6 56.7 53.9 51.5
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