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Economy in Brief

U.S. ISM Nonmanufacturing Index Weakens, Along with Prices
by Tom Moeller  August 5, 2019

The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) declined to 53.7 during July from 55.1 in June. It was the lowest level since August 2016. The Action Economics Forecast Survey expected a reading of 55.5.

Haver Analytics constructs a composite index combining the nonmanufacturing ISM index and the manufacturing ISM measure, which was released last Thursday. This composite index fell to 53.4 from 54.7 in June. That was the lowest reading since August 2016. During the last fifteen years, there has been a 71% correlation between the Composite Index and the q/q change in real GDP.

Component indexes were mixed last month. The business activity measure fell sharply to 53.1, its lowest level since August 2016. The new orders series declined to 54.1, also the lowest level in nearly three years. The supplier delivery series held steady at 51.5, still indicating the quickest delivery speeds since mid-2017.

The employment measure improved to 56.2 from 55.0 and remained up from the April low of 53.7. Twenty-seven percent of survey respondents reported higher employment while twelve percent indicated a decline.

The prices index fell to 56.5, but it remained up from its February low. Twenty-one percent of respondents reported higher prices while six percent reported price declines.

Other series, not included in the total, weakened last month. The export series fell to the lowest level since April and was lower y/y. The backlog of orders index also weakened. The inventory change index declined sharply, and reversed three months of improvement.

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) Jul Jun May Jul'18 2018 2017 2016
Composite Diffusion Index 53.7 55.1 56.9 56.7 58.9 57.0 54.9
   Business Activity 53.1 58.2 61.2 57.7 61.5 60.2 58.0
   New Orders 54.1 55.8 58.6 59.4 61.3 59.3 57.6
   Employment 56.2 55.0 58.1 56.6 56.9 55.1 52.5
   Supplier Deliveries (NSA) 51.5 51.5 49.5 53.0 55.8 53.2 51.5
Prices Index 56.5 58.9 55.4 63.3 62.1 57.6 52.6
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