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Economy in Brief

U.S. ISM Nonmanufacturing Index Weakens to Lowest Point Since June
by Tom Moeller  November 5, 2014

Nonmanufacturing activity eased for a second straight month in October. The Institute for Supply Management's (ISM) composite nonmanufacturing index declined to 57.1 from 58.6 in September. It was the lowest level since June. This diffusion index indicates expansion of nonmanufacturing activity when above 50. Last month's figure fell short of expectations for 58.0 in the Action Economics Forecast Survey.

Haver Analytics calculates a composite index of factory sector activity (released Monday) plus nonmanufacturing activity. It fell to 57.3 in October, the lowest level since June. During the last ten years, there has been a 75% correlation between the index and the q/q change in real GDP.

Performance in the components was mostly negative last month. The business activity series fell to 60.0, its lowest point since June. The new orders reading dropped to 59.1, its weakest reading in six months. The vendor deliveries index dropped to 49.5 indicating the quickest delivery speeds in twelve months. Offsetting these declines was a rise in the employment figure to 59.6, a record high. During the last ten years, there has been a 92% correlation between the employment index and the m/m change in service plus construction payrolls.

The prices paid series fell to its lowest level since September 2009. Fifteen percent of respondents paid higher prices, down from the 2011 high of 57%. Fourteen paid lower prices, up from this year's low of 3%.

The ISM data are available in Haver's USECON database. The expectations figure from Action Economics is in the AS1REPNA database.

R.I.P. QE3 ... Or Will It? from the Federal Reserve Bank of Dallas is available here.

ISM Nonmanufacturing Survey (SA) Oct Sep Aug Oct'13 2013 2012 2011
Composite Diffusion Index 57.1 58.6 59.6 55.1 54.7 54.6 54.4
   Business Activity 60.0 62.9 65.0 58.9 56.7 57.7 57.2
   New Orders 59.1 61.0 63.8 56.4 55.9 56.6 56.3
   Employment 59.6 58.5 57.1 56.0 54.4 53.5 52.4
   Supplier Deliveries (NSA) 49.5 52.0 52.5 49.0 51.7 50.6 51.9
Prices Index 52.1 55.2 57.7 56.2 55.6 59.3 65.1
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