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Economy in Brief

U.S. ISM Nonmanufacturing and Composite Indexes Continue Downward-Trending Zig-Zag Pattern
by Gerald D. Cohen  November 5, 2019

The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) increased more than expected to 54.7 during October from 52.6 in September. August's reading was 56.4. Despite October's rise, the overall trend has been weakening. The Action Economics Forecast Survey anticipated 53.5 in October.

Haver Analytics constructs a composite index combining the nonmanufacturing and the manufacturing ISM, which was released last Friday. This composite index mirrored the nonmanufacturing index increasing to 54.0 from 52.1 with a similar downward-trending zig-zag pattern.

All of the component indexes for the nonmanufacturing sector increased, led by a 3.3 point jump in the employment measure. The other three measures rose by over one point. Of note, the employment measure improved because a drop in the number of respondents indicating they were shedding workers from a four-and-a-half year high of 19% in September. Meanwhile only 22% of firms said they were increasing employment in October (these numbers are not seasonally adjusted).

The prices index more than reversed September's rise, falling 3.4 points to 56.6. This was the result of a decline in the number of respondents indicated they were paying higher prices (these shares are not seasonally adjusted).

Both the export and import orders indexes declined, with imports below the 50-growth level for the second consecutive month. Order backlogs more than reversed last month's jump, falling to 48.5 from 54.0 -- its weakest reading in three years. These series are not included in the nonmanufacturing composite nor are they seasonally adjusted making month-to-month comparisons difficult.

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) Oct Sep Aug Oct'18 2018 2017 2016
Composite Diffusion Index 54.7 52.6 56.4 60.0 58.9 57.0 54.9
   Business Activity 57.0 55.2 61.5 62.6 61.5 60.2 58.0
   New Orders 55.6 53.7 60.3 61.7 61.3 59.3 57.6
   Employment 53.7 50.4 53.1 58.3 56.9 55.1 52.5
   Supplier Deliveries (NSA) 52.5 51.0 50.5 57.5 55.8 53.2 51.5
Prices Index 56.6 60.0 58.2 61.3 62.1 57.6 52.6
ISM Mfg + Nonmfg Composite (SA) 54.0 52.1 55.6 59.7 58.9 57.0 54.5
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