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Economy in Brief

U.S. ISM Nonmanufacturing Index Indicates Slower Expansion
by Tom Moeller  May 3, 2012

The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) fell to 53.5 in April versus an unrevised 56.0 during March. Declines during the last two months pulled the figure to its lowest level this year. The latest compared to Consensus expectations for a lesser decline to 55.5. Since the series' inception in 1997 there has been a 58% correlation between the level of the nonmanufacturing composite index and the q/q change in real GDP for the service and the construction sectors.

Haver Analytics calculates a composite index using this number and the ISM manufacturing sector index released on Tuesday. The figure fell to 53.7, its lowest this year. During the last ten years there has been a 77% correlation between the figure and the quarterly change in real GDP.

The business activity component of the nonmanufacturing index collapsed to 54.6, its lowest level since October. The new orders series continued down also to its lowest since October. The supplier delivery series rose to 51.5, indicating slower delivery speeds and less economic slack. The employment series fell to 54.2, is lowest level this year. Since the series' inception in 1997 there has been an 87% 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 collapsed to 53.6, its lowest level since July 2009. A lessened 29% of respondents reported higher prices and 7% 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 Apr Mar Feb Apr'11 2011 2010 2009
Composite Index 53.5 56.0 57.3 54.4 54.5 54.1 46.3
   Business Activity 54.6 58.9 62.6 56.0 57.3 57.5 48.1
   New Orders 53.5 58.8 61.2 55.3 56.4 56.9 48.0
   Employment 54.2 56.7 55.7 53.3 52.4 49.7 40.0
   Supplier Deliveries (NSA) 51.5 49.5 49.5 53.0 51.9 52.2 49.0
Prices Index 53.6 63.9 68.4 68.3 65.1 61.6 49.5
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