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Economy in Brief
U.S. Leading Indicators Rebounded in March
The Conference Board's Composite Index of Leading Economic Indicators rebounded in March, rising 1.3% m/m (+7.9% y/y)...
Chicago Fed National Activity Index Increases in March
The Chicago Fed's National Activity Index increased to 1.71 during March...
Kansas City Fed Manufacturing Activity Strengthens in April
The Kansas City Fed reported that its manufacturing sector business activity index rose to a record 31 in April...
U.S. Initial Jobless Claims Fall Again to a New Pandemic-Period Low
Initial claims for unemployment insurance decreased again in the week ending April 17, reaching 547,000...
U.K. CBI Optimism Speaks Volumes
The U.K. CBI survey saw its order component backtrack in April...
Viewpoints
Commentaries are the opinions of the author and do not reflect the views of Haver Analytics.
by Gerald D. Cohen April 3, 2020
• ISM Nonmanufacturing index declined substantially less than expected to 52.5.
• COVID-19 related slowdown in supplier deliveries drove this reading.
• Slower supplier deliveries normally suggest economic strength, but in this case it is a sign of weakness.
The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) decreased to 52.5 during March from 57.3 in February. The Action Economics Forecast Survey anticipated a drop to 46.0 in March.
Business activity, new orders and employment measures all declined, with business activity and employment dropping below the 50-growth mark to levels not seen since 2009/10. However, the supplier delivery index jumped to 62.1 from 52.4, indicating substantially slower supplier deliveries. This measure is inverted since slower supplier deliveries are normally a sign of strength. However, in this case it is a reflection of COVID-19 related supply problems. Supplier deliveries also slowed meaningfully in 2008, during the Great Recession as credit constraints hampered business activity.
Haver Analytics constructs a composite index combining the nonmanufacturing and the manufacturing ISM, which was released on Wednesday. While the manufacturing index declined below the 50-growth mark to 49.1, it would have been meaningfully weaker had it not been for a similar jump in supplier deliveries. The composite index is based on GDP shares. Since nonmanufacturing makes up almost 90% of GDP, the March reading of the composite remained above 50.
Both the export and import orders fell sharply, with the import measure dropping to levels not seen since early 2009, in the midst of the Great Recession. The prices index declined to 50.0 as the number of respondents indicating they were paying lower prices jumped to a four-year high 14.1%. These series are not included in the nonmanufacturing composite nor are they seasonally adjusted.
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) | Mar | Feb | Jan | Mar'19 | 2019 | 2018 | 2017 |
---|---|---|---|---|---|---|---|
Composite Diffusion Index | 52.5 | 57.3 | 55.5 | 56.3 | 55.5 | 59.0 | 56.9 |
Business Activity | 48.0 | 57.8 | 60.9 | 58.0 | 58.0 | 61.7 | 60.2 |
New Orders | 52.9 | 63.1 | 56.2 | 59.2 | 57.5 | 61.4 | 59.3 |
Employment | 47.0 | 55.6 | 53.1 | 55.9 | 55.0 | 56.9 | 55.1 |
Supplier Deliveries (NSA) | 62.1 | 52.4 | 51.7 | 52.0 | 51.5 | 55.8 | 53.2 |
Prices Index | 50.0 | 50.8 | 55.5 | 57.5 | 57.6 | 62.1 | 57.7 |
ISM Manufacturing and Nonmanufacturing Composite | 52.1 | 56.5 | 55.0 | 56.1 | 55.0 | 59.0 | 57.0 |