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Economy in Brief

U.S. ISM Nonmanufacturing Activity Index Rebounds in May
by Tom Moeller  June 3, 2020

• Service sector business improves moderately.

• Business activity recovery is notable.

• Prices index steadies.

As states reopen, nonmanufacturing business activity is picking up. The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) rose to 45.4 during May after falling to 41.8 in April, which was the lowest level in just over ten years. A reading of 44.0 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 Monday. The composite index rose as well to 45.1 and recovered a part of its April decline to 41.8, 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 is based on GDP shares.

The index of business activity recovered from its record low of 26.0 in April to 41.0 in May. New orders also rose to 41.9 from a record low in April. The employment figure rose modestly. Seven percent of respondents reported increased hiring while 41% reported less. The supplier delivery series offset the improvements with a decline to 67.0 as delivery speeds picked up.

The prices index was little changed at 55.6 versus 55.1 in April. Thirty percent of respondents reported higher prices while a lessened 13% reported them lower. The percentage reporting no change in prices rose slightly.

The export orders series edged higher last month after collapsing to nearly a record low in April. Order backlogs eased but imports fell sharply. 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) May Apr Mar May'19 2019 2018 2017
Composite Diffusion Index 45.4 41.8 52.5 56.3 55.5 59.0 56.9
   Business Activity 41.0 26.0 48.0 60.1 58.0 61.7 60.2
   New Orders 41.9 32.9 52.9 58.5 57.5 61.4 59.3
   Employment 31.8 30.0 47.0 57.1 55.0 56.9 55.1
   Supplier Deliveries (NSA) 67.0 78.3 62.1 49.5 51.5 55.8 53.2
Prices Index 55.6 55.1 50.0 56.0 57.6 62.1 57.7
ISM Manufacturing and Nonmanufacturing Composite 45.1 41.8 52.1 55.9 55.0 59.0 57.0
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