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Economy in Brief

U.S. ISM Nonmanufacturing Index Weakens Slightly
by Tom Moeller  November 5, 2012

The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) fell to 54.2 last month from an unrevised 55.1 during September. The figure compared to Consensus expectations for 54.5. 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 last week. The figure fell m/m to 53.9 but that remained nearly the highest level since March. 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 55.4 and retraced its September rise. The new orders series also fell sharply to 54.8. The supplier delivery series remained at 51.5, its highest since March and thus indicating slower delivery speeds and less economic slack. The employment series improved significantly to 54.9, its highest level since March. 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 backpedaled to 65.6 from its recent high. A lessened 25% of respondents reported higher prices while 7% 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 Oct Sep Aug Oct'11 2011 2010 2009
Composite Index 54.2 55.1 53.7 52.6 54.5 54.1 46.3
   Business Activity 55.4 59.9 55.6 53.3 57.3 57.5 48.1
   New Orders 54.8 57.7 53.7 52.7 56.4 56.9 48.0
   Employment 54.9 51.1 53.8 52.3 52.4 49.7 40.0
   Supplier Deliveries (NSA) 51.5 51.5 51.5 52.0 51.9 52.2 49.0
Prices Index 65.6 68.1 64.3 61.0 65.1 61.6 49.5
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