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Economy in Brief

ISM Non-Manufacturing Index Higher
by Tom Moeller March 3, 2005

The Institute for Supply Management reported that the February Business Activity Index for the non-manufacturing sector rose to 59.8 from 59.2 the prior month. Consensus expectations had been for a decline to 57.0.

Since the series' inception in 1997 there has been a 50% correlation between the Business Activity Index and the q/q change in real GDP for services plus construction.

The employment sub index jumped 7.4 points to a record high. 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 plus the construction industries.

The new orders index rose to 61.6, the high end of a tight range held for the last year.

Pricing power eased a bit m/m to the lowest level in nearly a year.

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.

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

Financial Market Developments and Economic Activity during Current Account Adjustments in Industrial Economies from the Board of Governors of the Federal Reserve System is available here.

ISM Nonmanufacturing Survey Feb Jan Feb '04 2004 2003 2002
Business Activity Index 59.8 59.2 60.8 62.4 58.2 55.1
Prices Index 66.4 66.6 58.0 69.0 56.8 54.0
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