Non MFG ISM strength is cycling higher—so are prices

The NonMFG ISM shows that its components are indeed cycling higher. Prices are up strongly. Backlogs while below the neutral value of 50 are nonetheless rising strongly from their six month average. Still, they edged lower in the month of May. Orders also are edging higher. And activity is firming but not yet stronger on a three-month vs six month comparison.

In May the Non MFG ISM activity index moved up sharply. Orders also rose briskly. The report generated exactly the sort of strength we thought we would see after seeing employment strength in May.

The percentile positions of the various ISM components show a great deal of variation in the various ISM components (see table below). For the most part the readings are strong but not all are. The supplier deliveries reading, for example is in the bottom 12 percentile of its range and shows the same sort of slack or absence of tension on deliveries as the ISM MFG and other regional reports. Even as activity has ramped up slack has increased. Contrarily exports and inventories are at the top of their respective ranges going back to 1998. Activity is high in its range. Orders, prices and employment are at firm relative readings (Percentiles). While prices are 10 % above their average value, they has such large variation (std dev= 8.2) that they are still at a moderate position within their range of values.

Private non MFG jobs statistics are at the bottom of this table. Readings (monthly changes in non MFG jobs) are in the 65th percentile of their range since 1998 close to the 68.8 percentile for the Non Mfg ISM job diffusion reading. We appear to be getting consistent signals about the growing strength and firmness of the economy.