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Economy in Brief

U.S. ISM Nonmanufacturing Index Improves Further
by Tom Moeller  January 4, 2013

The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) improved to 56.1 last month from an unrevised 54.7 during November. The figure compared to Consensus expectations for a slip to 54.2. For the year, the index nudged up to 54.7 from 54.5 during 2011. 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 rose m/m to 55.5 and for the year was 54.3 versus 54.6 in 2011. During the last ten years there has been a 77% correlation between the figure and the quarterly change in real GDP.

Improvement in the employment component to 56.3, its highest in nine months, led last month's overall index rise. 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. That was accompanied by a rise to 59.3 in the new orders series, its highest since February. The business activity index slipped to 60.3. The supplier delivery series ticked down to 48.5, its lowest since late 2009, and indicated quicker delivery speeds.

The prices index fell further to 56.6, its lowest since July. A lessened 15% of respondents reported higher prices while 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. 

The minutes to the latest FOMC meeting can be found here.


ISM Nonmanufacturing Survey Dec Nov Oct Dec'11 2012 2011 2010
Composite Index 56.1 54.7 54.2 53.0 54.7 54.5 54.1
   Business Activity 60.3 61.2 55.4 55.9 57.7 57.3 57.5
   New Orders 59.3 58.1 54.8 54.6 56.6 56.4 56.9
   Employment 56.3 50.3 54.9 49.8 53.6 52.4 49.7
   Supplier Deliveries (NSA) 48.5 49.0 51.5 51.5 50.6 51.9 52.2
Prices Index 56.6 57.0 65.6 62.0 59.6 65.1 61.6
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