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Economy in Brief

U.S. ISM Nonmanufacturing Index Weakens
by Tom Moeller  June 5, 2017

The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) fell to 56.9 during May, and reversed all of its April increase. The Action Economics Forecast Survey expected a reading of 56.0. 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 which was released last Thursday. This composite declined to 56.7 in May, after rising to 57.2 in April. The index increased from 53.3 last May. During the last ten years, there has been a 73% correlation between this index and the q/q change in real GDP.

Most of the nonmanufacturing index component series declined last month. The new orders reading fell sharply to 57.7 following its April jump to a recovery high 63.2. The business activity index fell to 60.7 and reversed half of its April rise. The supplier delivery index fell to 51.5 and reversed all of its April gain.

The employment measure rose to 57.8, its highest level since July 2015. During the last ten years there has been an 89% correlation between the ISM nonmanufacturing sector jobs index and the m/m change in private service plus construction sector payrolls. Thirty percent (NSA) of industries reported a rising jobs level while 12% indicated a decline.

The prices paid index deteriorated to 49.2. It was the first indication of falling prices since February of last year. Seventeen percent (NSA) of firms reported paying higher prices while eleven percent of firms paid reported them lower.

Amongst the other detail indexes, which are not seasonally adjusted, export orders plunged m/m to 54.5. It reversed most of the prior three months' increase, but remained up y/y. The import index similarly fell sharply to 48.5, down from 53.5 one year earlier. The order backlog index rose to 57.0 from 50.0 twelve months earlier.

The ISM figures are available in Haver's USECON database, with additional detail in the SURVEYS database. The expectations figure from Action Economics is in the AS1REPNA database.

ISM Nonmanufacturing Survey (SA) May Apr Mar May'16 2016 2015 2014
Composite Diffusion Index 56.9 57.5 55.2 53.6 54.9 57.1 56.2
   Business Activity 60.7 62.4 58.9 56.0 58.0 60.8 59.6
   New Orders 57.7 63.2 58.9 54.8 57.5 59.2 58.5
   Employment 57.8 51.4 51.6 50.9 52.6 56.0 54.8
   Supplier Deliveries (NSA) 51.5 53.0 51.5 52.5 51.5 52.5 51.8
Prices Index 49.2 57.6 53.5 54.7 52.7 50.6 56.7
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