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Economy in Brief

   ISM Nonmanufacturing July Index Below Forecasts
by Tom Moeller August 3, 2007

The non-manufacturing sector Business Activity Index for July fell back to 55.8 from an unrevised 60.7 during the prior month according to the Institute for Supply Management.

Since the series' inception in 1997 there has been a 46% correlation between the level of the Business Activity Index and the Q/Q change in real GDP for services plus construction.

The employment sub index also fell to 51.7 from the high of 55.0 in June. Since the series' inception in 1997 there has been a 56% 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 new orders index also fell m/m to 52.8 from 56.9 in June, down for the second month in a row but the latest still indicates growth in new orders.

Pricing power also slipped for the second month, but by a hard 4.2 points to 61.3, the lowest level since February. 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..

ISM Nonmanufacturing Survey July June July '06 2006 2005 2004
Business Activity Index 55.8 60.7 55.7 58.0 60.2 62.5
Prices Index 61.3 65.5 72.1 65.2 68.0 68.8
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