Recent Updates

  • South Africa: CPI (Dec)
  • France: Guaranteed Minimum Wage (Jan)
  • Denmark: Consumer Confidence (Jan)
  • Sweden: TNS Prospera Survey (Jan)
  • China: General Government Revenue and Expenditure Press, Local Government Debt, IP Value Added by Region (Dec)
  • Japan: Real Trade Index, International Trade, Machine Tool Orders (Dec), All Industry Activity Indexes, Monthly Labor Survey, Wage Indexes, Hours Worked (Nov), Senior Loan Officer Survey(Q4)
  • more updates...

Economy in Brief

Challenger Indicates Labor MarketDeterioration
by Tom Moeller February 3, 2010

There's been little expansion but less contraction in the nonmanufacturing sector. That's the message from the Institute for Supply Management (ISM) for the service & construction sectors. Their Composite Index ticked up to 50.5 from a downwardly revised 49.8 during December. Material improvement is indicated by the rise in the series from a low of 37.2 late in 2008. The latest figure about matched Consensus expectations. Since the series' inception in 1997 there has been a 65% correlation between the level of the composite 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.

Amongst the components, the business activity index for the service sector was above break-even for the fifth month in the last six. The new orders index was even stronger as it posted a rise to the highest level since June of 2007. Also, the employment index improved to the highest level since August 2008 and was up sharply from its low at the end of that 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. 

As activity improved, pricing power did as well with a rise for the fourth straight month to near the highest level since September 2008. The pricing index rose m/m to 58.7 and was up sharply from one year ago. Since its inception ten years ago, there has been a 73% correlation between the price index and the q/q change in the GDP services chain price index.

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.

Recessions Happen: Now What? from the Federal Reserve Bank of St. Louis is available here here

ISM Nonmanufacturing Survey January December November Jan. '09 2009 2008 2007
Composite Index 50.5 49.8 48.4 43.2 46.2 47.3 53.5
   Business Activity 52.2 53.2 49.6 44.1 48.0 47.4 56.0
   New Orders 54.7 52.0 53.7 41.6 47.9 47.0 54.8
   Employment 44.6 43.6 41.7 35.4 39.9 43.8 52.0
   Supplier Deliveries 50.5 50.5 48.5 51.5 49.0 51.1 51.1
Prices Index 61.2 59.6 57.1 42.1 49.4 66.0 63.8
large image