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Economy in Brief

U.S. ISM Nonmanufacturing Index Moves Slightly Higher but Prices Fall Further
by Tom Moeller  February 4, 2015

The Institute for Supply Management (ISM) composite index of nonmanufacturing sector activity inched up to 56.7 during January from a revised 56.5 in December. Earlier data was revised due to new seasonal factors. The latest numbers remained well below the highs of the second half of 2014. The latest figure compared to 56.5 expected in the Action Economics Forecast Survey.

Haver Analytics constructs a composite index of the nonmanufacturing ISM index and the ISM factory sector measure, released Monday. It remained stable m/m at 56.3 but was the lowest reading since June. During the last ten years, there has been a 75% correlation between the index and the q/q change in real GDP.

Improvement last month in the composite index was paced by a rise in the measure of business activity to 61.5. That was, nevertheless, slightly below its earlier highs. The supplier deliveries measure also showed that delivery speeds had slowed. The new orders measure gained slightly m/m to 59.5, but it's been moving lower for six months. The employment index provided evidence that hiring weakened significantly. Its decline to 51.6 left it at the lowest level since last February. During the last ten years, there has been an 88% correlation between the employment index and the m/m change in service plus construction payrolls.

The prices paid series fell sharply to 45.5, the second month indicating declining prices. Fourteen percent of respondents paid higher prices, down from the 2011 high of 57%. Twenty percent paid lower prices, up from the June 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) Jan Dec Nov Jan'14 2014 2013 2012
Composite Diffusion Index 56.7 56.5 58.8 54.3 56.3 54.6 54.6
   Business Activity 61.5 58.6 63.4 56.6 59.7 56.7 57.6
   New Orders 59.5 59.2 61.0 52.2 58.6 55.8 56.5
   Employment 51.6 55.7 56.3 56.0 54.9 54.3 53.5
   Supplier Deliveries (NSA) 54.0 52.5 54.5 52.5 51.8 51.7 50.6
Prices Index 45.5 49.8 55.0 57.0 56.8 55.6 59.3
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