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Economy in Brief

U.S. ISM Nonmanufacturing Index Strengthens
by Tom Moeller  July 5, 2018

Business activity in the service sector is strong. The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) rose to 59.1 during June from an unrevised 58.6 in May. It was the highest level since February. The Action Economics Forecast Survey expected a reading of 58.3 for last month. 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 increased to 59.2 from 58.6, up from 57.1 last June. 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 was mixed last month. The business activity reading increased to 63.9, the highest level of the economic expansion. The new orders index rose to 63.2, up from December's low of 54.5. Working lower, the supplier delivery index backpedaled to 55.5, indicating a quicker pace of order fulfillment.

The employment measure declined to 53.6 and equaled the lowest level since April of last year. 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 29% (NSA) of industries reported a rising jobs level and a fairly stable 13% indicated a decline.

The prices paid index fell to 60.7. It was the lowest level in six months, but remained higher than December's low. A lessened 29% (NSA) of firms reported paying higher prices while four percent of firms paid less.

Amongst the other detail indexes, which are not seasonally adjusted, the export order series rebounded modestly m/m, and was up sharply y/y. The import index fell sharply to a four-month low. The order backlog index backed away from May's record high, but remained strong.

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'17 2017 2016 2015
Composite Diffusion Index 59.1 58.6 56.8 57.2 56.9 54.9 57.1
   Business Activity 63.9 61.3 59.1 60.7 60.1 58.0 60.8
   New Orders 63.2 60.5 60.0 60.2 59.3 57.5 59.2
   Employment 53.6 54.1 53.6 55.5 55.2 52.6 56.0
   Supplier Deliveries (NSA) 55.5 58.5 54.5 52.5 53.2 51.5 52.5
Prices Index 60.7 64.3 61.8 53.3 57.7 52.6 50.6
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