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Economy in Brief

U.S. ISM Nonmanufacturing Index Down Slightly Along With Prices
by Tom Moeller October 3, 2008

The September Composite Index for the nonmanufacturing sector from the Institute for Supply Management slipped to 50.2 from an unrevised 50.6 during August. The figure about matched Consensus expectations.

The nonmanufacturing business activity sub-index, however, rose to 52.1 which was its highest level since May. 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 rose last month to 50.8 which was the highest level since May.

The employment index, conversely, fell m/m to 44.2 which was the lowest level since June. 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 also slipped to 70.0 which was its lowest level since March. 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.

Beginning with the January 2008 Nonmanufacturing Report On Business®, the composite index is 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.

ISM surveys more than 370 purchasing managers in more than 62 industries including law firms, hospitals, government and retailers. The nonmanufacturing survey dates back to July 1997.

ISM Nonmanufacturing Survey September August September '07 2007 2006 2005
Composite Index 50.2 50.6 53.2 53.5 55.7 58.0
Prices Index 70.0 72.9 65.0 63.8 65.3 68.0
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