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Economy in Brief

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

The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) declined to 57.4 during October from an unrevised 60.1 in September. It was lowest level in three months. The Action Economics Forecast Survey expected 58.4. 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 released Friday. This composite fell to 57.5 during October and was the lowest reading also since August. During the last ten years, there has been a 73% correlation between this index and the q/q change in real GDP.

Declines amongst the component series were all inclusive last month. The business activity measure eased to 61.4 and the new orders reading fell to 58.7, a three month low. The supplier delivery fell to 54.0, indicating quicker delivery speeds. That reversed two months of strength which probably were due to recent hurricane activity.

The employment measure declined to 55.3, the lowest level since July. 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. A greatly lessened 23% (NSA) of industries reported a rising jobs level while a sharply higher 16% indicated a decline.

The prices paid index fell to a three-month low of 60.7. A lessened 21% (NSA) of firms reported paying higher prices while a lessened six percent of firms reported them lower.

Amongst the other detail indexes, which are not seasonally adjusted, export orders fell m/m to 57.0, and remained below the 65.5 April high. The import index rose m/m to 52.5, but stayed below last year's high. The order backlog index fell sharply to 51.5, the lowest level since January.

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) Nov Oct Sep Nov'16 2016 2015 2014
Composite Diffusion Index 57.4 60.1 59.8 56.2 54.9 57.1 56.2
   Business Activity 61.4 62.2 61.3 60.3 58.0 60.8 59.6
   New Orders 58.7 62.8 63.0 57.4 57.5 59.2 58.5
   Employment 55.3 57.5 56.8 55.2 56.0 56.0 54.8
   Supplier Deliveries (NSA) 54.0 58.0 58.0 52.0 51.5 52.5 51.8
Prices Index 60.7 62.7 66.3 55.6 52.7 50.6 56.7
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