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Economy in Brief

U.S. ISM Nonmanufacturing Index Increases Modestly
by Tom Moeller  June 5, 2013

The Activity Index for the service and construction sectors from the Institute for Supply Management (ISM) improved to 53.7 during May from 53.1 during April. This latest level, nevertheless, remained the lowest in nine months and compared to consensus expectations for 53.4. 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 Monday. The figure rose modestly m/m to 53.2 but remained the lowest reading since July. During the last ten years there has been a 74% correlation between the composite and the quarterly change in real GDP.

Last month's increase in the nonmanufacturing index reflected a higher reading of business activity (56.5), a better new orders figure (56.0) and a slight uptick in supplier deliveries (52.0), suggesting slower delivery speeds. The employment component fell to 50.1, its lowest level since last July. 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 prices index slipped to 51.1, its lowest reading since last June. A lessened 20% of respondents reported higher prices while an increased 11% 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 (SA) May Apr Mar May'12 2012 2011 2010
Composite Diffusion Index 53.7 53.1 54.4 53.7 54.6 54.5 54.1
   Business Activity 56.5 55.0 56.5 55.0 57.7 57.2 57.6
   New Orders 56.0 54.5 54.6 55.6 56.6 56.3 57.0
   Employment 50.1 52.0 53.3 51.8 53.5 52.4 49.8
   Supplier Deliveries (NSA) 52.0 51.0 53.0 53.0 50.6 51.9 52.2
Prices Index 51.1 51.2 55.9 51.4 59.3 65.1 61.4
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