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Economy in Brief

U.S. ISM Nonmanufacturing Index Unexpectedly Rebounds
by Tom Moeller  July 6, 2017

The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) improved to 57.4 during June, and reversed virtually all of its May decline. The Action Economics Forecast Survey expected a reading of 56.5. 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 released Monday. This composite rose to 57.4 in June after declining to 56.7 in May. It remained up from 55.7 twelve months earlier. 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 improved last month. The new orders reading rose m/m to 60.5 but remained below the April high. The supplier delivery index increased to 52.5 and roughly equaled its Q2 average. The business activity index was little changed m/m, near the middle of this year's range.

The employment measure declined to 55.8, but remained up from the readings of the last 18 months. 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. Thirty-two percent (NSA) of industries reported a rising jobs level while 12% indicated a decline.

The prices paid index increased to 52.1 and made up some of its May decline. The index remained below its January high of 59.0. Nineteen percent (NSA) of firms reported paying higher prices while nine percent of firms paid reported them lower.

Amongst the other detail indexes, which are not seasonally adjusted, export orders rose slightly m/m to 55.0 and remained up from 53.0 twelve months earlier. The import index rose m/m to 51.0 but remained down y/y. The order backlog index fell sharply m/m, but was up from 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) Jun May Apr Jun'16 2016 2015 2014
Composite Diffusion Index 57.4 56.9 57.5 56.1 54.9 57.1 56.2
   Business Activity 60.8 60.7 62.4 58.8 58.0 60.8 59.6
   New Orders 60.5 57.7 63.2 58.9 57.5 59.2 58.5
   Employment 55.8 57.8 51.4 52.5 52.6 56.0 54.8
   Supplier Deliveries (NSA) 52.5 51.5 53.0 54.0 51.5 52.5 51.8
Prices Index 52.1 49.2 57.6 54.6 52.7 50.6 56.7
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