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Economy in Brief

U.S. ISM Nonmanufacturing Index Unchanged
by Tom Moeller September 6, 2007

The non-manufacturing sector Business Activity Index for August was unchanged from its July level of 55.8, according to the Institute for Supply Management. Consensus expectations had been for a decline to 54.5.

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, however, fell a sizable 3.8 points to 47.9. The latest figure, if it holds, would indicate declines in employment; it followed a 3.3 point drop in July. 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.

Offsetting this decline was a 4.2 point increase in the new orders index to 57.0 and the latest indicates growth in new orders.

Pricing power slipped for the third month to its 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.

The 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 of five components.

ISM Nonmanufacturing Survey August July August '06 2006 2005 2004
Business Activity Index 55.8 55.8 56.9 58.0 60.2 62.5
Prices Index 58.6 61.3 71.9 65.2 68.0 68.8
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