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Economy in Brief

U.S. ISM Nonmanufacturing Index Posts Unexpected Rise; Prices Improve
by Tom Moeller  September 5, 2019

The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) increased to 56.4 during August from 53.7 in July. It was the highest level in three months but remained sharply below the high of 60.8 in August of last year. The Action Economics Forecast Survey expected a reading of 54.0.

Haver Analytics constructs a composite index combining the nonmanufacturing ISM index and the manufacturing ISM measure, which was released Tuesday. This composite index increased to 55.6 from a low of 53.4 in July. It remained well below the high of 60.7 last September. 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 rebounded to 61.5, the highest reading in six months. The new orders series improved to 60.3, also its highest level in six months. Working lower was the supplier delivery series to 50.5 from 51.5 in the prior two months. That indicated somewhat faster delivery speeds, and they remained much quicker than last year.

The employment measure declined to 53.1 from 56.2. It was the lowest level since March 2017. Twenty-two percent of survey respondents reported higher employment while 18% percent indicated a decline.

The prices index rebounded to 58.2, but has moved erratically sideways all year. Twenty percent of respondents reported higher prices while six percent reported price declines.

Other series, not included in the total, weakened last month. The export orders series fell to the lowest level since January 2017. The backlog of orders index also declined sharply, but the inventory change index rose modestly.

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) Aug Jul Jun Aug'18 2018 2017 2016
Composite Diffusion Index 56.4 53.7 55.1 58.8 58.9 57.0 54.9
   Business Activity 61.5 53.1 58.2 61.3 61.5 60.2 58.0
   New Orders 60.3 54.1 55.8 61.2 61.3 59.3 57.6
   Employment 53.1 56.2 55.0 56.8 56.9 55.1 52.5
   Supplier Deliveries (NSA) 50.5 51.5 51.5 56.0 55.8 53.2 51.5
Prices Index 58.2 56.5 58.9 62.5 62.1 57.6 52.6
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