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Economy in Brief


U.S. ISM Nonmanufacturing Index Retraces Earlier Gain
by Tom Moeller  October 3, 2014

The pace of nonmanufacturing activity backpedaled in September. The Institute for Supply Management's (ISM) composite nonmanufacturing index declined to 58.6 from 59.6 in August and 58.7 in July. This is a diffusion index where a reading above 50 indicates expansion of nonmanufacturing activity. Last month's decline roughly matched expectations for 58.5 in the Action Economics Forecast Survey.

Haver Analytics calculates a composite index of factory sector activity (released Wednesday) plus nonmanufacturing activity. It fell to 58.3 in September and was just below the July reading. Nevertheless, the quarterly average of the index was at its highest level since Q4 2004. During the last ten years, there has been a 75% correlation between the index and the q/q change in real GDP.

Performance in the components was mixed last month. The business activity series fell to 62.9 and gave back most of its August gain. Nevertheless, the quarterly reading of 63.4 was the highest level since 2004. The new orders reading fell for the second month, but here again the quarterly level was at its highest point since 2005. The vendor deliveries index slipped to 52.0 and remained in the range in place since 2010. The employment figure improved to 58.5, the highest level, since 2005. During the last ten years there has been a 92% correlation between the employment index and the m/m change in service plus construction payrolls.

The prices paid series fell to its lowest level since February. Sixteen percent of respondents paid higher prices, down from the 2011 high of 57%. Nine percent paid lower prices, up from this year's low of 3%.

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) Sep Aug Jul Sep'13 2013 2012 2011
Composite Diffusion Index 58.6 59.6 58.7 54.5 54.7 54.6 54.4
   Business Activity 62.9 65.0 62.4 55.8 56.7 57.7 57.2
   New Orders 61.0 63.8 64.9 58.1 55.9 56.6 56.3
   Employment 58.5 57.1 56.0 54.1 54.4 53.5 52.4
   Supplier Deliveries (NSA) 52.0 52.5 51.5 50.0 51.7 50.6 51.9
Prices Index 55.2 57.7 60.9 56.9 55.6 59.3 65.1
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