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Economy in Brief

U.S. ISM Nonmanufacturing Index Strengthens
by Tom Moeller  October 5, 2016

The Composite Index of Nonmanufacturing Sector Business Activity from the Institute for Supply Management (ISM) improved to 57.1 in September from an unrevised 51.4 in August. It was the highest level since October 2015. Expectations in the Action Economics Forecast Survey had been for 52.9. 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 Monday. This Composite rose to 56.4, also its highest level since October. 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 showed sharp improvement. The business activity index rose to 60.3, the highest level since October of last year. New orders similarly jumped to 60.0 from 51.4. Finally, employment neared the October high with a surge to 57.2. 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 eased to 51.0, about where it's been for three months.

The prices paid series increased 54.0, its highest level in three months. Fifteen percent (NSA) of respondents paid higher prices while 12 percent paid less.

The export order series rebounded to 56.5 and made up its August decline. The imports series was little changed at 51.0. The order backlog measure increased sharply to 52.0. 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) Sep Aug Jul Sep'15 2015 2014 2013
Composite Diffusion Index 57.1 51.4 55.5 56.7 57.1 56.2 54.6
   Business Activity 60.3 51.8 59.3 60.1 60.8 59.7 56.6
   New Orders 60.0 51.4 60.3 56.4 59.2 58.6 55.8
   Employment 57.2 50.7 51.4 57.9 56.1 54.9 54.3
   Supplier Deliveries (NSA) 51.0 51.5 51.0 52.5 52.5 51.8 51.7
Prices Index 54.0 51.8 51.9 49.1 50.7 56.8 55.7
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