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Economy in Brief

U.S. ISM Nonmanufacturing Index Declines
by Tom Moeller  May 3, 2018

The pace of business activity in the service sector continues to moderate. The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) fell to 56.8 during April from an unrevised 58.8 in March. The Action Economics Forecast Survey expected a slip to 58.2 last month. Despite the decline from a January high of 59.9, the index remained up sharply versus the August 2016 low of 51.6. 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 Tuesday. This composite fell to 56.9 from 58.9 in March and roughly equaled the level twelve months earlier. During the last ten years, there has been a 71% correlation between this index and the q/q change in real GDP.

Movement amongst the component series remained mixed last month. The business activity reading declined moderately to 59.1, but remained improved versus the 2016 low. The new orders index rose modestly to 60.0 and also remained up versus 2016. The vendor delivery index fell sharply and indicated the quickest rate of order fulfillment since November.

The employment measure declined sharply to the lowest level in twelve months. During the last ten years, there has been an 87% correlation between the ISM nonmanufacturing sector jobs index and the m/m change in private service plus construction sector payrolls. An increased 24% (NSA) of industries reported a rising jobs level and a stable 13% indicated a decline.

The prices paid index rose negligibly to 61.8 and remained up sharply versus its February 2016 low. A strengthened 33% (NSA) of firms reported paying higher prices while a stable four percent of firms reported paying less.

Amongst the other detail indexes, which are not seasonally adjusted, the export order series surged m/m to the highest level in twelve months. It remained up sharply versus 2016. The import index backed away from March's twelve-month high. The order backlog index declined sharply to the lowest level in three months.

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'17 2017 2016 2015
Composite Diffusion Index 56.8 58.8 59.5 57.3 56.9 54.9 57.1
   Business Activity 59.1 60.6 62.8 61.9 60.1 58.0 60.8
   New Orders 60.0 59.5 64.8 62.1 59.3 57.5 59.2
   Employment 53.6 56.6 55.0 52.2 55.2 52.6 56.0
   Supplier Deliveries (NSA) 54.5 58.5 55.5 53.0 53.2 51.5 52.5
Prices Index 61.8 61.5 61.0 58.0 57.7 52.6 50.6
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