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Economy in Brief

U.S. ISM Nonmanufacturing Index Recovers
by Tom Moeller  April 3, 2014

The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) bounced up last month to 53.1 after a sharp February decline to 51.6. The latest figure roughly matched expectations for 53.2 in the Action Economics Forecast Survey. During the last ten years, there has been a 75% 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 an index using the ISM nonmanufacturing series and the ISM manufacturing sector index released Tuesday. The March figure increased to 53.2 from a recent low of 51.8. During the last ten years, there has been a 76% correlation between the composite index and the quarterly change in real GDP.

Leading the total index higher last month was a recovery in non-manufacturing payrolls. During the last ten years, there has been an 89% correlation between the employment index and the m/m change in private service sector plus construction payrolls. The new orders index also gained. Working still lower was the business activity and the supplier delivery indexes.

The prices paid index improved to 58.3, its highest level since July 2013. Twenty eight percent of respondents indicated higher prices last month while four percent reported lower. During the last ten years, there has been a 78% 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. Readings above 50 indicate expansion in activity.

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) Mar Feb Jan Mar'13 2013 2012 2011
Composite Diffusion Index 53.1 51.6 54.0 54.5 54.7 54.6 54.4
   Business Activity 53.4 54.6 56.3 56.6 56.7 57.7 57.2
   New Orders 53.4 51.3 50.9 55.2 55.9 56.6 56.3
   Employment 53.6 47.5 56.4 53.2 54.4 53.5 52.4
   Supplier Deliveries (NSA) 52.0 53.0 52.5 53.0 51.7 50.6 51.9
Prices Index 58.3 53.7 57.1 56.4 55.6 59.3 65.1
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