Global| Jan 05 2012U.S. ISM Nonmanufacturing Index Improves Just Slightly
by:Tom Moeller
|in:Economy in Brief
Summary
In a testimony to still sluggish economic growth, service sector activity improved just slightly last month. The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) ticked up to 52.6 [...]
In a testimony to still sluggish economic growth, service sector activity improved just slightly last month. The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) ticked up to 52.6 in December versus an unrevised 52.0 during November. The figure remained near the lowest since January, 2010 and disappointed Consensus expectations for 53.0. Since the series' inception in 1997 there has been a 71% correlation between the level of the nonmanufacturing composite index and the q/q change in real GDP for the service and the construction sectors.
The nonmanufacturing index report follows last week's indication that the ISM factory sector index for December rose moderately. Haver Analytics calculates a composite index using the two readings of the factory and nonmanufacturing sectors. It rose to 52.7 from 52.1 but remained near the lowest reading since January, 2010. The composite index has a 71% correlation with q/q growth in real GDP during the last ten years.
The business activity component of the nonmanufacturing index was unchanged m/m at 56.2. That's down from 62.9 in December, 2010. The new orders series also ticked up m/m but remained depressed versus last year. The supplier delivery series improved to 51.5 and still suggested quick delivery speeds and more economic slack. The employment series remained below 50 but was slightly higher m/m at 49.4. Since the series' inception in 1997 there has been an 84% correlation between the level of the ISM nonmanufacturing employment index and the m/m change in payroll employment in the service-producing plus the construction industries.
The prices index eased slightly to 61.2 from 62.5 in November. It remained down versus early-2011. A low and stable twenty three percent of respondents reported higher prices and a higher seven percent reported them lower. Since inception ten years ago, there has been a 65% correlation between the price index and the Q/Q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing Report On Business ®,the composite index is calculated as an indication of overall economic conditions for the non-manufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights.
The ISM data are available in Haver's USECON database. The expectations figure from ACTION ECONOMICS is in the AS1REPNA database.
| ISM Nonmanufacturing Survey | Dec | Nov | Oct | Dec'10 | 2011 | 2010 | 2009 |
|---|---|---|---|---|---|---|---|
| Composite Index | 52.6 | 52.0 | 52.9 | 57.1 | 54.5 | 54.0 | 46.3 |
| Business Activity | 56.2 | 56.2 | 53.8 | 62.9 | 57.2 | 57.4 | 48.1 |
| New Orders | 53.2 | 53.0 | 52.4 | 61.4 | 56.3 | 56.8 | 48.0 |
| Employment | 49.4 | 48.9 | 53.3 | 52.6 | 52.4 | 49.8 | 40.0 |
| Supplier Deliveries (NSA) | 51.5 | 50.0 | 52.0 | 51.5 | 51.9 | 52.2 | 49.0 |
| Prices Index | 61.2 | 62.5 | 57.1 | 69.5 | 65.1 | 61.4 | 49.4 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
