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Economy in Brief

U.S. ISM Nonmanufacturing Index Strengthens
by Tom Moeller  October 4, 2017

The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) rose to 59.8 during September from an unrevised 55.3 in August. It was the highest level since August 2005. The Action Economics Forecast Survey expected 55.4. 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 59.9 during September and was the highest reading also since August 2005. During the last ten years, there has been a 73% correlation between this index and the q/q change in real GDP.

Movement amongst the component series was positive last month. The supplier delivery index surged to 58.0 as delivery speeds slowed markedly. The new orders reading increased to 63.0, the highest level since April. The business activity index rose to 61.3, also its highest level since April.

The employment measure improved to 56.8, the highest level in four 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. A greatly lessened 22% (NSA) of industries reported a rising jobs level while an easier 12% indicated a decline.

The prices paid index jumped to 66.3, the highest level since February 2012. A higher 31% (NSA) of firms reported paying higher prices while a lessened four percent of firms reported them lower.

Amongst the other detail indexes, which are not seasonally adjusted, export orders rose m/m to 56.0, but remained down sharply versus the 65.5 April high. The import index rose m/m to 52.0, but stayed below last year's high. The order backlog index jumped m/m to the highest level since May.

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) Sep Aug Jul Sep'16 2016 2015 2014
Composite Diffusion Index 59.8 55.3 53.9 56.6 54.9 57.1 56.2
   Business Activity 61.3 57.5 55.9 59.8 58.0 60.8 59.6
   New Orders 63.0 57.1 55.1 59.6 57.5 59.2 58.5
   Employment 56.8 56.2 53.6 56.0 56.0 56.0 54.8
   Supplier Deliveries (NSA) 58.0 50.5 51.0 51.0 51.5 52.5 51.8
Prices Index 66.3 57.9 55.7 53.5 52.7 50.6 56.7
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