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Economy in Brief

ISM Non-Manufacturing Index Recovered
by Tom Moeller November 3, 2005

The October Non-manufacturing Sector Business Activity Index from the Institute for Supply Management recovered more than half of its September decline with a 6.7 point increase to 60.0. Consensus expectations had been for a lesser recovery 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 orders index gained back just a piece of its September decline with a 1.6 point rise. Conversely, the employment index fell for the third month in the last four 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 reversed just some of the 14.3 point September surge to a record high with a 3.4 point decline. Since inception eight years ago, there has been a 70% correlation between the price index and the y/y change in the GDP Services chain price index.

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.

Today's testimony by Fed Chairman Alan Greenspan on the Economic Outlook before the Joint Economic committee can be found here.

ISM Nonmanufacturing Survey Oct Sept Oct '04 2004 2003 2002
Business Activity Index 60.0 53.3 61.5 62.4 58.2 55.1
Prices Index 78.0 81.4 74.0 69.0 56.8 54.0
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