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Economy in Brief

U.S. ISM Nonmanufacturing Index Increases To Highest Since May '08
by Tom Moeller October 5, 2009

Improvement in service sector activity broadened last month to its highest level since May of last year. The Composite Index for the nonmanufacturing sector from the Institute for Supply Management (ISM) rose to 50.9, a level that indicates there was growth in overall service sector activity. The latest level was the highest since May of last year and the figure outpaced Consensus expectations for an increase to 50.0. A level of the ISM index above 50 indicates rising overall service sector activity. Since the series' inception in 1997 there has been a 64% correlation between the level of the composite index index in the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.

ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997. The figures are available in Haver's USECON database.

The improvement in the index again was broad-based amongst the component series. The business activity index for the service sector remained above the break-even level of 50 for the second month. The new orders series also broached 50, up from November's low of 35.6. In addition, the employment index rose to 44.2 and that was the highest level since August of last year. Since the series' inception in 1997 there has been an 80% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.

>Beginning with the January 2008 Nonmanufacturing Report On Business®, the composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found here.

Housing's Great Fall: Putting Household Balance Sheets Together Again from the Federal Reserve Bank of St. Louis can be found here. 

ISM Nonmanufacturing Survey September August September '08 2008 2007 2006
Composite Index 50.9 48.4 50.0 47.4 53.5 55.7
   Business Activity 55.1 51.3 51.5 47.4 56.0 58.0
   New Orders 54.2 49.9 50.6 47.0 54.8 57.1
   Employment 44.3 43.5 44.2 43.8 52.0 53.8
   Supplier Deliveries 50.0 49.0 53.5 51.1 51.1 53.8
Prices Index 48.8 63.1 70.6 66.0 63.8 65.3
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