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Economy in Brief

U.S. ISM Nonmanufacturing Index Declines Sharply, Nearing 2014 Low
by Tom Moeller  February 3, 2016

The Composite Index of Nonmanufacturing Sector Business from the Institute for Supply Management (ISM) declined to 53.5 during January from an upwardly revised 55.8 in December. It was the lowest level since February 2014. Consensus expectations had been for 55.3 in the Action Economics Forecast Survey. The ISM data are diffusion indexes where a reading above 50 indicates expansion. Data back to 2014 were revised.

Haver Analytics constructs a Composite Index using the nonmanufacturing ISM index and the ISM factory sector measure released Monday. It fell to 52.9, also the lowest level since February 2014. During the last ten years, there has been a 72% correlation between the index and the q/q change in real GDP.

The decline in the nonmanufacturing index was broad-based. The business activity series weakened to 53.9, the lowest level since August 2012. The employment index declined to 52.1, indicating the weakest job growth in twelve months. 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 fell to 56.5, a four month low. Moving to the upside was the supplier delivery index to 51.5. That indicated slower delivery speeds and reversed most of the prior December decline.

The prices paid series fell below break-even to 46.4 from 51.0, revised from 49.7. Twelve percent (NSA) of respondents paid higher prices while 19 percent paid less.

The export order series (NSA) dropped sharply to 45.5. It represented the greatest decline in export volumes since March 2009. The imports series also collapsed showing the largest decline since July 2012. The order backlog measure rose slightly.

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

ISM Nonmanufacturing Survey (SA) Jan Dec Nov Jan'15 2015 2014 2013
Composite Diffusion Index 53.5 55.8 56.6 56.9 57.1 56.2 54.6
   Business Activity 53.9 59.5 59.4 61.3 60.8 59.7 56.6
   New Orders 56.5 58.9 57.9 60.0 59.2 58.6 55.8
   Employment 52.1 56.3 56.0 52.1 56.1 54.9 54.3
   Supplier Deliveries (NSA) 51.5 48.5 53.0 54.0 52.5 51.8 51.7
Prices Index 46.4 51.0 50.0 46.5 50.7 56.8 55.7
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