Global| Apr 04 2012U.S. ISM Nonmanufacturing Index Retraces Its Earlier Gain
by:Tom Moeller
|in:Economy in Brief
Summary
Service sector activity backpedaled last month. The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) fell to 56.0 in March versus an unrevised 57.3 during February and 56.8 in [...]
Service sector activity backpedaled last month. The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) fell to 56.0 in March versus an unrevised 57.3 during February and 56.8 in January. The latest was just below Consensus expectations for 56.8. Since the series' inception in 1997 there has been a 58% correlation between the level of the nonmanufacturing composite index and the q/q change in real GDP for the service and the construction sectors.
Haver Analytics calculates a composite index using this number and the ISM manufacturing sector index released on Monday. The figure fell to 55.7 from 56.7. Nevertheless, the Q1'12 figure of 56.3 was up sharply from 52.7 in Q4. During the last ten years there has been a 77% correlation between the figure and the quarterly change in real GDP.
The business activity component of the nonmanufacturing index fell sharply to 58.9, more-than-giving back its February gain. The new orders series also retrenched m/m to 58.8 while the supplier delivery series was stable at 49.5, indicating quickened delivery speeds and more economic slack. The employment series improved to 56.7 and retraced some of its February decline. It remained near the highest level since 2006. Since the series' inception in 1997 there has been an 87% 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 reversed its earlier gain and fell to 63.9. An improved 40% of respondents reported higher prices and just 2% 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 | Mar | Feb | Jan | Mar'11 | 2011 | 2010 | 2009 |
|---|---|---|---|---|---|---|---|
| Composite Index | 56.0 | 57.3 | 56.8 | 56.3 | 54.5 | 54.1 | 46.3 |
| Business Activity | 58.9 | 62.6 | 59.5 | 58.6 | 57.3 | 57.5 | 48.1 |
| New Orders | 58.8 | 61.2 | 59.4 | 60.9 | 56.4 | 56.9 | 48.0 |
| Employment | 56.7 | 55.7 | 57.4 | 54.3 | 52.4 | 49.7 | 40.0 |
| Supplier Deliveries (NSA) | 49.5 | 49.5 | 51.0 | 51.5 | 51.9 | 52.2 | 49.0 |
| Prices Index | 63.9 | 68.4 | 63.5 | 68.9 | 65.1 | 61.6 | 49.5 |
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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