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Economy in Brief

U.S. ISM Nonmanufacturing Index Slips
by Tom Moeller  July 6, 2011

The June Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) fell to 53.3 from an unrevised 54.6 in May. The figure was just shy of Consensus expectations for 54.0. Since the series' inception in 1997 there has been a 71% correlation between the level of the nonmanufacturing composite index and the q/q change in real GDP for the services and the construction sectors.

The Composite Index decline was led by lower readings for new orders, to 53.6, and supplier deliveries, to 52.0. Near-stability in the business activity index, at 53.4, and employment, at 54.1, also was observed. Since the series' inception in 1997 there has been an 84% 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.

The prices index fell sharply m/m to 60.9, its lowest since last July. A reduced thirty-five percent of respondents reported higher prices while seven percent reported them lower. Since inception ten years ago, there has been a 65% 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 indication of overall economic conditions 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 ISM data are available in Haver's USECON database. The expectations figure from ACTION ECONOMICS is in the AS1REPNA database.

ISM Nonmanufacturing Survey Jun May Apr Jun'10 2010 2009 2008
Composite Index 53.3 54.6 52.8 53.5 54.0 46.3 47.3
   Business Activity 53.4 53.6 53.7 57.2 57.4 48.1 47.5
   New Orders 53.6 56.8 52.7 55.0 56.8 48.0 47.0
   Employment 54.1 54.0 51.9 48.8 49.8 40.0 43.7
   Supplier Deliveries (NSA) 52.0 54.0 53.0 53.0 52.2 49.0 51.1
Prices Index 60.9 69.6 70.1 55.9 61.4 49.4 66.1
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