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Economy in Brief

U.S. ISM Nonmanufacturing Index Stabilizes; Prices Strengthen
by Tom Moeller  January 5, 2017

The Composite Index of Nonmanufacturing Sector Business Activity from the Institute for Supply Management (ISM) held at 57.2 during December versus an unrevised 57.2 in November. This level was the highest since October 2015, and compared to expectations for 56.8 in the Action Economics Forecast Survey. During all of 2016, the index eased to 55.0 from 57.1 in 2015. 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 improved to 56.9 last month from 56.7, and was the highest level since October of 2015. For all of last year, the composite index declined to 54.6 from 56.4 in 2015. During the last ten years, there has been a 73% correlation between this index and the q/q change in real GDP.

Performance amongst the nonmanufacturing components was mixed last month. The new orders index increased to 61.6, its highest level since August 2015. Supplier Deliveries held steady at 52.0, near the mid-point of the last two years' range. The business activity series slipped to 61.4, but remained near the highest level since October 2015. Employment declined sharply to 53.8, but the Q4 average of 55.0 was the highest in a year. 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 prices paid series recovered to 57.0, and was at the highest level since August 2014. Fourteen percent (NSA) of respondents paid higher prices while nine percent paid less.

The export order series fell sharply to 55.0, the lowest level since August. For all of last year the index was stable y/y at 53.3. The imports series also declined to 50.0, the lowest point since January. The order backlog measure fell to 48.0, the lowest point in six months. 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) Dec Nov Oct Dec'15 2016 2015 2014
Composite Diffusion Index 57.2 57.2 54.8 55.8 55.0 57.1 56.2
   Business Activity 61.4 61.7 57.7 59.5 58.1 60.8 59.7
   New Orders 61.6 57.0 57.7 58.9 57.6 59.2 58.6
   Employment 53.8 58.2 53.1 56.3 h52.7 56.1 54.9
   Supplier Deliveries (NSA) 52.0 52.0 50.5 48.5 51.5 52.5 51.8
Prices Index 57.0 56.3 56.6 51.0 52.8 50.7 56.8
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