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Economy in Brief

U.S. ISM Nonmanufacturing Index Improves Slightly
by Tom Moeller  August 3, 2012

The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) ticked up to 52.6 in July following sharp declines in three of the prior four months. The figure remained near the lowest in two years. The latest roughly matched Consensus expectations for 52.5. 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 Wednesday. The figure improved m/m to 52.3 but was down from its Q2 average of 53.1. 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 rose sharply to 57.2, its highest since March. The new orders series increased to 54.3 and made up half of its June decline. The supplier delivery series fell sharply 49.5, its lowest since November 2009, indicating faster delivery speeds and more economic slack. The employment series fell sharply to 49.3, its lowest level since September of last 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 improved sharply to 54.9, its highest level since March. An improved 19% of respondents reported higher prices and 10% 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 Jul Jun May Jul'11 2011 2010 2009
Composite Index 52.6 52.1 53.7 53.4 54.5 54.1 46.3
   Business Activity 57.2 51.7 55.6 57.2 57.3 57.5 48.1
   New Orders 54.3 53.3 55.5 53.3 56.4 56.9 48.0
   Employment 49.3 52.3 50.8 52.7 52.4 49.7 40.0
   Supplier Deliveries (NSA) 49.5 51.0 53.0 50.5 51.9 52.2 49.0
Prices Index 54.9 48.9 49.8 60.6 65.1 61.6 49.5
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