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Economy in Brief

U.S. ISM Nonmanufacturing Index Remains Weakened
by Tom Moeller  June 5, 2012

The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) ticked up to 53.7 in May following its sharp April decline to 53.5. The figures remained near the lowest level since December. The latest roughly matched Consensus expectations for 53.5. 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 Friday. The figure was unchanged at 53.7, also its lowest since December. 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 bounced up to 55.6 following its April collapse. The new orders series was unchanged at its lowest since October. The supplier delivery series jumped to 53.0, its highest in twelve months, indicating slower delivery speeds and less economic slack. The employment series fell sharply to 50.8, 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 fell further to 49.8, its lowest level since July 2009. A lessened 19% of respondents reported higher prices and 9% 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.

Mobile Payments: What's in It for Consumers? from the Federal Reserve Bank of Kansas City is available here.

ISM Nonmanufacturing Survey May Apr Mar May'11 2011 2010 2009
Composite Index 53.7 53.5 56.0 54.5 54.5 54.1 46.3
  Business Activity 55.6 54.6 58.9 54.5 57.3 57.5 48.1
 New Orders 55.5 53.5 58.8 55.9 56.4 56.9 48.0
 Employment 50.8 54.2 56.7 53.6 52.4 49.7 40.0
 Supplier Deliveries (NSA) 53.0 51.5 49.5 54.0 51.9 52.2 49.0
Prices Index 49.8 53.6 63.9 67.2 65.1 61.6 49.5
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