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Economy in Brief

U.S. ISM Nonmanufacturing Index Slows
by Carol Stone, CBE  September 6, 2016

The Composite Index of Nonmanufacturing Sector Business Activity from the Institute for Supply Management (ISM) decreased to 51.4 in August from 55.5 in July. Expectations in the Action Economics Forecast Survey had been for a much more modest slowing to 55.5. The ISM data are diffusion indexes where readings above 50 indicate expansion.

Haver Analytics constructs a Composite Index using the nonmanufacturing ISM index and the ISM factory sector measure that was released September 1st. This Composite declined from 55.2 to 51.2, which is the lowest reading since January 2010. During the last ten years, there has been a 73% correlation between this index and the q/q change in real GDP.

Several of the nonmanufacturing components slowed noticeably. The business activity index retreated to 51.8 in August from 59.3 in July. New orders similarly declined, down to 51.4 in August after 60.3 in July. And employment eased to 50.7 from 51.4. 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. In contrast, the supplier deliveries index firmed slightly, moving from 51.0 in July to 51.5 in August.

The prices paid series was little changed at 51.8 last month versus 51.9 in July. Ten percent (NSA) of respondents paid higher prices while 9 percent paid lower prices.

The export order series dropped markedly to 46.5 from 55.5. The imports series was 50.5, down from 53.0. The order backlog measure retreated from 51.0 to 49.5, as 12% of respondents had larger backlogs, but 13% saw backlogs shrink. Each of these last few readings is not seasonally adjusted

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

ISM Nonmanufacturing Survey (SA) Aug Jul Jun Aug'15 2015 2014 2013
Composite Diffusion Index 51.4 55.5 56.5 58.3 57.1 56.2 54.6
   Business Activity 51.8 59.3 59.5 62.3 60.8 59.7 56.6
   New Orders 51.4 60.3 59.9 62.1 59.2 58.6 55.8
   Employment 50.7 51.4 52.7 56.2 56.1 54.9 54.3
   Supplier Deliveries (NSA) 51.5 51.0 54.0 52.5 52.5 51.8 51.7
Prices Index 51.8 51.9 55.5 50.5 50.7 56.8 55.7
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