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Economy in Brief

U.S. ISM Nonmanufacturing Index and Prices Recover
by Tom Moeller  May 3, 2017

The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) rebounded to 57.5 during April, and recovered most of the March decline to an unrevised 55.2. The Action Economics Forecast Survey expected a reading of 56.0. 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 which was released Monday. This composite increased to 57.2 in April, after falling to 55.4 in March from February's 57.6. During the last ten years, there has been a 73% correlation between this index and the q/q change in real GDP.

Most of the nonmanufacturing index component series increased last month. The new orders reading surged to 63.2, the highest level of the economic expansion. The business activity index rose to 62.4 after falling to 58.9. The supplier delivery index increased to 53.0, indicating that delivery speeds slowed to the weakest pace since June. Working the other way, the employment index eased to 51.4, its lowest level since August. During the last ten years there has been an 89% correlation between the ISM nonmanufacturing sector jobs index and the m/m change in private service plus construction sector payrolls.

The prices paid index rebounded to 57.6 and recovered most of the March decline. Thirty-six percent (NSA) of firms reported paying higher prices, up from 8% at the low in December 2015. Five percent of firms paid lower prices, the least since June.

Amongst the other detail indexes, which are not seasonally adjusted, export orders surged m/m to 65.5, the highest level since May 2007. The import index eased m/m to 53.0, down from 54.0 one year earlier. The order backlog index rose to 53.5 from 51.5 twelve months earlier.

The ISM figures are available in Haver's USECON database, with additional detail in the SURVEYS database. The expectations figure from Action Economics is in the AS1REPNA database.

ISM Nonmanufacturing Survey (SA) Apr Mar Feb Apr'16 2016 2015 2014
Composite Diffusion Index 57.5 55.2 57.6 55.7 54.9 57.1 56.2
   Business Activity 62.4 58.9 63.6 58.8 58.0 60.8 59.6
   New Orders 63.2 58.9 61.2 59.5 57.5 59.2 58.5
   Employment 51.4 51.6 55.2 53.3 52.6 56.0 54.8
   Supplier Deliveries (NSA) 53.0 51.5 50.5 51.0 51.5 52.5 51.8
Prices Index 57.6 53.5 57.7 53.3 52.7 50.6 56.7
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