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Economy in Brief

U.S. ISM Nonmanufacturing Index Improves Again
by Tom Moeller  May 5, 2014

The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) rose to 55.2 in April, the second consecutive monthly gain. The latest figure beat expectations for 54.0 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 Thursday. The April figure also increased to 55.2 from a February low of 51.8. During the last ten years, there has been a 76% correlation between this composite index and the quarterly change in real GDP.

Leading the nonmanufacturing index higher last month was a jump in the business activity series to 60.9, its highest level since August. Rising sharply as well was the new orders figure to 58.2, also its highest point since August. Countering these gains was a moderate drop in nonmanufacturing payrolls to 51.3. 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 supplier delivery index also fell to 50.5, indicating the quickest delivery speeds in six months.

The prices paid index jumped to 60.8, its highest level since October 2012. Thirty one percent of respondents indicated higher prices last month while four percent reported them 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 nonmanufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries), each 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) Apr Mar Feb Apr'13 2013 2012 2011
Composite Diffusion Index 55.2 53.1 51.6 53.8 54.7 54.6 54.4
   Business Activity 60.9 53.4 54.6 55.9 56.7 57.7 57.2
   New Orders 58.2 53.4 51.3 55.7 55.9 56.6 56.3
   Employment 51.3 53.6 47.5 52.6 54.4 53.5 52.4
   Supplier Deliveries (NSA) 50.5 52.0 53.0 51.0 51.7 50.6 51.9
Prices Index 60.8 58.3 53.7 53.0 55.6 59.3 65.1
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