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Economy in Brief

U.S. ISM Nonmanufacturing Collapses in April
by Tom Moeller  May 5, 2020

• ISM Nonmanufacturing Index weakened substantially to 2009 low.

• Business activity and new orders lead the index lower.

• Prices strengthen.

The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) weakened to 41.8 during April from 52.5 in March. It was the lowest level since March 2009. A reading of 37.7 had been expected in the Action Economics Forecast Survey.

Haver Analytics constructs a composite index combining the nonmanufacturing index and the manufacturing reading which was released on Friday. The composite index fell as well to 41.8, also the lowest level since March 2009. During the last 15 years, there has been a 64% correlation between the index level and the q/q change in real GDP. The composite index is based on GDP shares.

The reading of business activity plummeted to a record low for the series which began in 1997. New orders also fell to a record low as did the employment figure. Only six percent of respondents reported increased hiring while 47% reported less. The supplier delivery series offset these declines with a record increase, as the percentage of respondents reporting slower delivery speeds soared.

The prices index rose modestly to 55.1. A greatly increased 31% of respondents reported higher prices while a little-changed 16% reported them lower. The percentage reporting no change in prices droppedsharply.

The export orders series collapsed to nearly a record low. Order backlogs also fell but imports recaptured most of a severe decline during March. These series are not seasonally adjusted and are not included in the nonmanufacturing composite.

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) Apr Mar Feb Apr'19 2019 2018 2017
Composite Diffusion Index 41.8 52.5 57.3 55.7 55.5 59.0 56.9
   Business Activity 26.0 48.0 57.8 59.6 58.0 61.7 60.2
   New Orders 32.9 52.9 63.1 58.3 57.5 61.4 59.3
   Employment 30.0 47.0 55.6 54.5 55.0 56.9 55.1
   Supplier Deliveries (NSA) 78.3 62.1 52.4 50.5 51.5 55.8 53.2
Prices Index 55.1 50.0 50.8 55.6 57.6 62.1 57.7
ISM Manufacturing and Nonmanufacturing Composite 41.8 52.1 56.5 55.4 55.0 59.0 57.0
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