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Economy in Brief

U.S. ISM Nonmanufacturing Index Eases Further; Prices Fall
by Tom Moeller  January 6, 2016

The Composite Index of Nonmanufacturing Sector Business, from the Institute for Supply Management (ISM), declined to 55.3 last month and added to an unrevised November decline to 55.9. It was the lowest level since April 2014. Consensus expectations had been for 56.0 in the Action Economics Forecast Survey. Despite the decline, for all of last year the ISM index averaged 57.2, the highest level in ten years. ISM data are diffusion indexes where a reading above 50 indicates expansion.

Haver Analytics constructs a Composite Index using the nonmanufacturing ISM index and the ISM factory sector measure released Monday. It eased to 54.4, the lowest level since March 2014. During the last ten years, there has been a 73% correlation between the index and the q/q change in real GDP.

The decline in the nonmanufacturing index was due to a sharp drop in the supplier deliveries reading to 48.5, suggesting the fastest delivery speeds in three years. Amongst the other component series, small increases were logged. The business activity reading gained to 58.7, but remained below the July high of 64.9. Similarly, the employment index rose to 55.7, still well below its July high of 59.6. During the last ten years, there has been a 96% correlation between the employment index and the m/m change in service plus construction payrolls. The new orders index also improved modestly to 58.2.

The prices paid series fell below break-even to 49.7, the third month in the last four suggesting declining prices. Eight percent (NSA) of respondents paid higher prices while 14 percent paid less.

The export order series (NSA) recovered most of its November decline with a rise to 53.5 while imports declined to the lowest level in six months. The inventory series declined slightly following two months of increase.

The figures are available in Haver's USECON database. The expectations figure from Action Economics is in the AS1REPNA database.

ISM Nonmanufacturing Survey (SA) Dec Nov Oct Dec'14 2015 2014 2013
Composite Diffusion Index 55.3 55.9 59.1 56.5 57.2 56.3 54.6
   Business Activity 58.7 58.2 63.0 58.6 60.8 59.7 56.7
   New Orders 58.2 57.5 62.0 59.2 59.3 58.6 55.8
   Employment 55.7 55.0 59.2 55.7 56.1 54.9 54.3
   Supplier Deliveries (NSA) 48.5 53.0 52.0 52.5 52.5 51.8 51.7
Prices Index 49.7 50.3 49.1 49.8 50.7 56.8 55.6
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