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Economy in Brief

ISM Nonmanufacturing Index Improved
by Tom Moeller September 6, 2006

The August Business Activity Index for the non-manufacturing sector from the Institute for Supply Management (ISM) improved to 57.0 and exceeded Consensus expectations for stability near 55.0.

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

The new orders sub-index fell for the fourth consecutive month to the lowest level in three years while the employment index also fell to its 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 for the second month in the last three and was somewhat below the 2Q average. 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 back to July 1997.

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.

Barreling Down the Road to Recession? from the Federal Reserve Bank of St. Louis can be found here.

ISM Nonmanufacturing Survey Aug July Aug '05 2005 2004 2003
Business Activity Index 57.0 54.8 64.8 60.1 62.5 58.3
Prices Index 72.4 74.8 67.2 67.9 68.8 56.6
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