Global| Oct 03 2014U.S. ISM Nonmanufacturing Index Retraces Earlier Gain
by:Tom Moeller
|in:Economy in Brief
Summary
The pace of nonmanufacturing activity backpedaled in September. The Institute for Supply Management's (ISM) composite nonmanufacturing index declined to 58.6 from 59.6 in August and 58.7 in July. This is a diffusion index where a [...]
The pace of nonmanufacturing activity backpedaled in September. The Institute for Supply Management's (ISM) composite nonmanufacturing index declined to 58.6 from 59.6 in August and 58.7 in July. This is a diffusion index where a reading above 50 indicates expansion of nonmanufacturing activity. Last month's decline roughly matched expectations for 58.5 in the Action Economics Forecast Survey.
Haver Analytics calculates a composite index of factory sector activity (released Wednesday) plus nonmanufacturing activity. It fell to 58.3 in September and was just below the July reading. Nevertheless, the quarterly average of the index was at its highest level since Q4 2004. During the last ten years, there has been a 75% correlation between the index and the q/q change in real GDP.
Performance in the components was mixed last month. The business activity series fell to 62.9 and gave back most of its August gain. Nevertheless, the quarterly reading of 63.4 was the highest level since 2004. The new orders reading fell for the second month, but here again the quarterly level was at its highest point since 2005. The vendor deliveries index slipped to 52.0 and remained in the range in place since 2010. The employment figure improved to 58.5, the highest level, since 2005. During the last ten years there has been a 92% correlation between the employment index and the m/m change in service plus construction payrolls.
The prices paid series fell to its lowest level since February. Sixteen percent of respondents paid higher prices, down from the 2011 high of 57%. Nine percent paid lower prices, up from this year's low of 3%.
The ISM data are available in Haver's USECON database. The expectations figure from Action Economics is in the AS1REPNA database.
| ISM Nonmanufacturing Survey (SA) | Sep | Aug | Jul | Sep'13 | 2013 | 2012 | 2011 |
|---|---|---|---|---|---|---|---|
| Composite Diffusion Index | 58.6 | 59.6 | 58.7 | 54.5 | 54.7 | 54.6 | 54.4 |
| Business Activity | 62.9 | 65.0 | 62.4 | 55.8 | 56.7 | 57.7 | 57.2 |
| New Orders | 61.0 | 63.8 | 64.9 | 58.1 | 55.9 | 56.6 | 56.3 |
| Employment | 58.5 | 57.1 | 56.0 | 54.1 | 54.4 | 53.5 | 52.4 |
| Supplier Deliveries (NSA) | 52.0 | 52.5 | 51.5 | 50.0 | 51.7 | 50.6 | 51.9 |
| Prices Index | 55.2 | 57.7 | 60.9 | 56.9 | 55.6 | 59.3 | 65.1 |
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.
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