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Economy in Brief

U.S. ISM Nonmanufacturing Index Declines to 6-Month Low
by Tom Moeller  December 3, 2015

Improvement in service sector business activity slowed substantially during November. The Institute for Supply Management (ISM) Composite Index of Nonmanufacturing Sector Business fell sharply to 55.9 and reversed the unrevised October increase to 59.1. It was the lowest level since May. Consensus expectations had been for a lesser decline to 58.0 in the Action Economics Forecast Survey. The ISM data are diffusion indexes where a reading above 50 indicates expansion.

Haver Analytics constructs a Composite Index using the nonmanufacturing ISM index and the ISM factory sector measure released Tuesday. It fell sharply to 55.0, also a 6-month low. During the last ten years, there has been a 73% correlation between the index and the q/q change in real GDP.

The decline in the nonmanufacturing index reflected shortfalls in most component series. The business activity reading fell to 58.2, its lowest reading since March. The employment index also declined to 55.0, a five-month low. During the last ten years, there has been a 96% correlation between the employment index and the m/m change in service plus construction payrolls. The new orders index fell to 57.5, reversing most of the prior month's increase. Working the other way, the supplier delivery series improved to 53.0 and indicated the slowest delivery speeds since July.

The prices paid series improved slightly to a roughly break-even level of 50.3. It followed two months below 50. Nine percent (NSA) of respondents paid higher prices while 16 percent paid less.

The export order series (NSA) declined to its lowest level since April as imports also eased. The inventory series recovered two months of decline.

The figures 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'14 2014 2013 2012
Composite Diffusion Index 55.9 59.1 56.9 58.8 56.3 54.6 54.6
   Business Activity 58.2 63.0 60.2 63.4 59.7 56.7 57.6
   New Orders 57.5 62.0 56.7 61.0 58.6 55.8 56.5
   Employment 55.0 59.2 58.3 56.3 54.9 54.3 53.5
   Supplier Deliveries (NSA) 53.0 52.0 52.5 54.5 51.8 51.7 50.6
Prices Index 50.3 49.1 48.4 55.0 56.8 55.6 59.3
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