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Economy in Brief

ISM Non-Manufacturing Index Fell Slightly
by Tom Moeller May 4, 2005

The Institute for Supply Management reported that the April Business Activity Index for the non-manufacturing sector fell to 61.7 from 63.1 in March. The index had risen for two successive months but because of a sharp decline in January the average level so far this year of 61.0 is below the 2004 average. Consensus expectations had been for a reading of 61.0 in April.

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 new orders index dropped sharply to 58.8, its lowest in nearly two years, while the employment sub index also fell to the lowest level since January. 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.

Pricing power fell again m/m to the lowest level in over 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.

ISM Nonmanufacturing Survey April March April '04 2004 2003 2002
Business Activity Index 61.7 63.1 66.9 62.4 58.2 55.1
Prices Index 61.9 65.6 66.9 69.0 56.8 54.0
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