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Economy in Brief

U.S. ISM Nonmanufacturing Index Backpedals; Prices Improve
by Tom Moeller  November 3, 2016

The Composite Index of Nonmanufacturing Sector Business Activity from the Institute for Supply Management (ISM) fell to 54.8 during October from an unrevised 57.1 in September. The decline disappointed expectations for 56.0 in the Action Economics Forecast Survey. The ISM data are diffusion indexes where readings above 50 indicate expansion.

Haver Analytics constructs a Composite Index using the nonmanufacturing ISM index and the ISM factory sector measure that was released Tuesday. This Composite fell to 54.5 from 56.4. During the last ten years, there has been a 73% correlation between this index and the q/q change in real GDP.

Each of the nonmanufacturing components fell last month. The business activity index declined to 57.7, following a sharp increase to 60.3. New orders similarly fell to 57.7 from 60.0. Employment fell to 53.1 following the prior month's surge to 57.2. 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 supplier deliveries index eased to 50.5, down sharply from the June high of 54.0.

The prices paid series increased 56.6, its highest level since August 2014. Thirteen percent (NSA) of respondents paid higher prices while 6 percent paid less.

The export order series eased to 55.5 following a jump to 56.5. The imports series also increased to 53.0, a three-month high. The order backlog measure held steady at 52.0 following a sharp September increase. Each of these last few readings is not seasonally adjusted.

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

ISM Nonmanufacturing Survey (SA) Oct Sep Aug Oct'15 2015 2014 2013
Composite Diffusion Index 54.8 57.1 51.4 58.3 57.1 56.2 54.6
   Business Activity 57.7 60.3 51.8 61.8 60.8 59.7 56.6
   New Orders 57.7 60.0 51.4 60.8 59.2 58.6 55.8
   Employment 53.1 57.2 50.7 58.4 56.1 54.9 54.3
   Supplier Deliveries (NSA) 50.5 51.0 51.5 52.0 52.5 51.8 51.7
Prices Index 56.6 54.0 51.8 49.4 50.7 56.8 55.7
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