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Economy in Brief

U.S. ISM Nonmanufacturing Index Inches Higher
by Tom Moeller  March 05, 2013

The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) improved to 56.0 last month from 55.2 during January. Expectations had been for 55.0. Since the series' inception in 1997 there has been a 75% 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 the ISM nonmanufacturing and the ISM manufacturing sector index released Friday. The figure improved m/m to 55.8, its highest level in two years. During the last ten years there has been a 74% correlation between the composite and the quarterly change in real GDP.

Last month's improvement in the nonmanufacturing index was led by a higher new orders figure. It recovered its January decline and was at the highest level in twelve months. The business activity index increased slightly but remained below its earlier high. The employment component slipped to 57.2 yet remained near its highest level since February 2006. Since the series' inception in 1997 there has been an 88% 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 supplier delivery index fell to 51.5.

The prices index increased again but at 61.7 remained below its earlier high. An increased 31% of respondents reported higher prices while just 6% 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.

Challenges Confronting Monetary Policy is the title of yesterday's speech by Fed Vice Chair Janet L Yellen and it is available here.


ISM Nonmanufacturing Survey (SA) Feb Jan Dec Feb'12 2012 2011 2010
Composite Diffusion Index 56.0 55.2 55.7 56.1 54.6 54.5 54.1
   Business Activity 56.9 56.4 60.8 60.3 57.7 57.2 57.6
   New Orders 58.2 54.4 58.3 59.6 56.6 56.3 57.0
   Employment 57.2 57.5 56.3 54.9 53.5 52.4 49.8
   Supplier Deliveries (NSA) 51.5 52.5 48.5 49.5 50.6 51.9 52.2
Prices Index 61.7 58.0 56.1 67.9 59.3 65.1 61.4
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