Global| Sep 04 2008U.S. ISM Nonmanufacturing Index Up, Prices Down
by:Tom Moeller
|in:Economy in Brief
Summary
The Composite Index for the nonmanufacturing sector, from the Institute for Supply Management, again ticked up. For August it rose to 50.6 from an unrevised 49.5 during July. The latest was the highest level since May. Consensus [...]
Beginning with the January 2008 Nonmanufacturing Report On Business®, a composite index is now calculated as an indicator of the overall economic condition for the non-manufacturing sector. It is a composite index based on the diffusion indexes for four of the indicators (business activity, new orders, employment and supplier deliveries) with equal weights. The latest report from the ISM can be found here.
The nonmanufacturing business activity sub-index rose to 51.6 from 49.6 in July and the latest level equaled the 2Q average. Since the series' inception in 1997 there has been a 48% correlation between the level of the business activity index for the nonmanufacturing sector and the Q/Q change in real GDP for the services and the construction sectors.
The new orders sub-index also made up the prior month's decline and rose to 49.7, the highest level since May.
The employment index, conversely, fell m/m to 45.4 and reversed half of its July improvement. Since the series' inception in 1997 there has been a 56% 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.
Pricing power fell sharply to 72.9 which was its lowest level since May. Since inception ten years ago, there has been a 60% correlation between the price index and the q/q change in the GDP services chain price index.
ISM surveys more than 370 purchasing managers in more than 62 industries including construction, law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.
| ISM Nonmanufacturing Survey | August | July | August '07 | 2007 | 2006 | 2005 |
|---|---|---|---|---|---|---|
| Composite Index | 50.6 | 49.5 | 52.8 | 53.5 | 55.7 | 58.0 |
| Prices Index | 72.9 | 80.8 | 60.1 | 63.8 | 65.3 | 68.0 |
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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