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Economy in Brief

ISM Non-Manufacturing Index Recovered
by Tom Moeller July 6, 2005

The Business Activity Index for the non-manufacturing sector recovered in June all of the prior month's decline and rose to 62.2, reported the Institute for Supply Management. Consensus expectations had been for stability at 58.2.

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.

A higher employment index led the improvement last month. The rise to 57.4 was to the highest level since February. 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 index of new orders dipped slightly to 59.5 but pricing power recovered a bit.

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 June May June '04 2004 2003 2002
Business Activity Index 62.2 58.5 61.1 62.4 58.2 55.1
Prices Index 59.8 57.9 72.9 69.0 56.8 54.0
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