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Economy in Brief

U.S. ISM Nonmanufacturing Index Regains Strength
by Tom Moeller  December 3, 2014

Nonmanufacturing activity rebounded last month following two months of decline. The Institute for Supply Management's (ISM) composite nonmanufacturing index rose to 59.3 from 57.1 in October. The figure nearly reached its August peak and was just below the August 2005 high. This diffusion index indicates expansion of nonmanufacturing activity when above 50. Last month's figure exceeded expectations for 57.9 in the Action Economics Forecast Survey.

Haver Analytics calculates a composite index of factory sector activity (released Monday) plus nonmanufacturing activity. It improved to 59.2 in November and also was near the earlier highs. During the last ten years, there has been a 75% correlation between the index and the q/q change in real GDP.

Performance amongst the components was mostly positive last month. The business activity series rebounded to 64.4 after two months of decline. The new orders reading gained to 61.4 but failed to recover two months of decline. The vendor deliveries index jumped to 54.5, indicating the slowest delivery speeds since August of last year. Offsetting these gains was a decline in the employment figure to 56.7, off from the record high reached in October. 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 rose following five straight months of decline. Fourteen percent of respondents paid higher prices, down from the 2011 high of 57%. Twelve percent 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.

ISM Nonmanufacturing Survey (SA) Nov Oct Sep Nov'13 2013 2012 2011
Composite Diffusion Index 59.3 57.1 58.6 54.1 54.7 54.6 54.4
   Business Activity 64.4 60.0 62.9 55.3 56.7 57.7 57.2
   New Orders 61.4 59.1 61.0 55.7 55.9 56.6 56.3
   Employment 56.7 59.6 58.5 54.5 54.4 53.5 52.4
   Supplier Deliveries (NSA) 54.5 49.5 52.0 51.0 51.7 50.6 51.9
Prices Index 54.4 52.1 55.2 52.7 55.6 59.3 65.1
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