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Economy in Brief

U.S. ISM Nonmanufacturing Index Reaches Six-Month High
by Tom Moeller  October 3, 2012

The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) jumped to 55.1 last month from an unrevised 53.7 during August. The latest was the highest level since March and easily beat Consensus expectations for 53.0. 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 Monday. The figure improved m/m to 54.7, also the highest level since March. 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 recovered to 59.9, its highest level since February, while the new orders series improved to 57.7. The supplier delivery series was unchanged at 51.5, its highest since March and thus indicating slower delivery speeds and less economic slack. The employment series countered these improvements with a decline to 51.1. 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 jumped to 68.1, its highest level since February. A stable 28% of respondents reported higher prices while a minimal and much-reduced 1% 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'11 2011 2010 2009
Composite Index 55.1 53.7 52.6 52.6 54.5 54.1 46.3
   Business Activity 59.9 55.6 57.2 56.8 57.3 57.5 48.1
   New Orders 57.7 53.7 54.3 56.2 56.4 56.9 48.0
   Employment 51.1 53.8 49.3 47.9 52.4 49.7 40.0
   Supplier Deliveries (NSA) 51.5 51.5 49.5 49.5 51.9 52.2 49.0
Prices Index 68.1 64.3 54.9 64.8 65.1 61.6 49.5
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