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Economy in Brief

U.S. ISM Nonmanufacturing Index Gains Again
by Tom Moeller  September 6, 2012

The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) rose to 53.7 during August from an unrevised 52.6 July reading. The latest matched the highest level since March and beat Consensus expectations for 52.8. 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 improved m/m to 53.2 and was the highest since May. 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 fell to 55.6 and the new orders series slipped to 53.7. The supplier delivery series rose to 51.5, its highest since March, indicating slower delivery speeds and less economic slack. The employment series rose sharply to 53.8, its highest level since April. 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 64.3, its highest level since February. An improved 28% 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 Aug Jul Jun Aug'11 2011 2010 2009
Composite Index 53.7 52.6 52.1 53.8 54.5 54.1 46.3
   Business Activity 55.6 57.2 51.7 56.4 57.3 57.5 48.1
   New Orders 53.7 54.3 53.3 53.6 56.4 56.9 48.0
   Employment 53.8 49.3 52.3 52.2 52.4 49.7 40.0
   Supplier Deliveries (NSA) 51.5 49.5 51.0 53.0 51.9 52.2 49.0
Prices Index 64.3 54.9 48.9 62.1 65.1 61.6 49.5
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