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Economy in Brief

ISM Non-Manufacturing Index Rebounded
by Tom Moeller September 6, 2005

The Institute for Supply Management reported that the Business Activity Index for the non-manufacturing sector rebounded in August from the prior month's decline and jumped 4.5 points to 65.0, the highest level since April of last year. Consensus expectations had been for near stability at 60.

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.

Orders rose solidly for the second consecutive month to the highest level in two years and the employment index rose 3.4 points 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.

Pricing power backpedaled but just a bit. The 3.2 point decline reversed about one third of the jump in July.

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.

Survey Says ..., analyzing BLS's employment surveys, from the Federal Reserve Bank of St. Louis is available here.

ISM Nonmanufacturing Survey Aug July Aug '04 2004 2003 2002
Business Activity Index 65.0 60.5 59.3 62.4 58.2 55.1
Prices Index 67.1 70.3 70.1 69.0 56.8 54.0
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