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Economy in Brief

U.S. ISM Nonmanufacturing Index Remains Flat
by Tom Moeller  October 5, 2011

The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) was 53.0 versus an unrevised 53.3 during August. The figure matched Consensus expectations. 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 service and the construction sectors.

The nonmanufacturing index follows last week's report that the ISM factory sector index for September rose slightly. Haver Analytics calculates a composite index using the two readings of the factory and nonmanufacturing sectors. It fell marginally to 52.8 from 53.0 and was nearly the lowest reading since January of last year. The composite index has a 71% correlation with Q/Q growth in real GDP during the last ten years.

The business activity component of the Nonmanufacturing Index rose to its highest level (57.1) since March. The new orders series also improved to its highest (56.5) since March. The supplier delivery series fell sharply to its lowest (48.7) since March of last year. The employment series also dropped to its lowest (48.7) since March of 2010. 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 slipped m/m to 61.9. A lesser twenty four percent of respondents reported higher prices and a slightly reduced 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 Sep Aug Jul Sep'10 2010 2009 2008
Composite Index 53.0 53.3 52.7 53.9 54.0 46.3 47.3
   Business Activity 57.1 55.6 56.1 54.4 57.4 48.1 47.5
   New Orders 56.5 52.8 51.7 55.6 56.8 48.0 47.0
   Employment 48.7 51.6 52.5 50.7 49.8 40.0 43.7
   Supplier Deliveries (NSA) 49.5 53.0 50.5 55.0 52.2 49.0 51.1
Prices Index 61.9 64.2 56.6 61.0 61.4 49.4 66.1
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