NMI August 2008 Report

Economic activity in the non-manufacturing sector grew in August, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

“New home construction continues to struggle under the weight of the current unsold housing inventory.”Tweet this

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee; and senior vice president — supply management for Hilton Hotels Corporation. “The NMI (Non-Manufacturing Index) increased 1.1 percentage points in August to 50.6 percent, indicating growth after two months of contraction in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 2 percentage points to 51.6 percent. The New Orders Index increased 1.8 percentage points to 49.7 percent, and the Employment Index decreased 1.7 percentage points to 45.4 percent. The Prices Index decreased 7.9 percentage points to 72.9 percent in August, indicating a slower rate in price increases than in July. According to the NMI, 10 non-manufacturing industries reported growth in August. Respondents’ comments remain mixed about business conditions and reflect concern about the uncertainty of the economy.”

INDUSTRY PERFORMANCE (Based on the NMI)

The 10 industries reporting growth in August based on the new NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Mining; Health Care & Social Assistance; Educational Services; Utilities; Agriculture, Forestry, Fishing & Hunting; Construction; Professional, Scientific & Technical Services; Other Services(d); and Information. The eight industries reporting contraction in August are: Transportation & Warehousing; Finance & Insurance; Accommodation & Food Services; Wholesale Trade; Arts, Entertainment & Recreation; Management of Companies & Support Services; Retail Trade; and Public Administration.

WHAT RESPONDENTS ARE SAYING …

  • “Despite constant reminders of a tough economy … business prospects are fairly strong.” (Professional, Scientific & Technical Services)
  • “Fuel is easing, impacting many areas positively, but distributors are still under tremendous pressure due to the cost of diesel.” (Accommodation & Food Services)
  • “Although we’ve had some relief recently, energy prices continue to influence buying and budgeting decisions.” (Public Administration)
  • “New home construction continues to struggle under the weight of the current unsold housing inventory.” (Wholesale Trade)
  • “If the drop in oil prices can be sustained, we should see a more profitable third quarter.” (Utilities)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCECOMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS(a)AUGUST 2008
  
IndexNon-ManufacturingManufacturing
Series
Index
August
 Series
Index
July
 Percent
Point
Change
 Direction Rate of
Change
 Trend(b)
(Months)
Series
Index
August
 Series
Index
July
 Percent
Point
Change
 
NMI/PMI50.649.5+1.1GrowingFrom
Contracting
149.950.0-0.1
Business Activity/Production51.649.6+2.0GrowingFrom
Contracting
152.152.9-0.8
New Orders49.747.9+1.8ContractingSlower348.345.0+3.3
Employment45.447.1-1.7ContractingFaster449.751.9-2.2
Supplier Deliveries55.553.5+2.0SlowingFaster550.355.1-4.8
Inventories53.554.5-1.0GrowingSlower449.345.0+4.3
Prices72.980.8-7.9IncreasingSlower6377.088.5-11.5
Backlog of Orders49.052.0-3.0ContractingFrom
Growing
143.543.0+0.5
New Export Orders44.547.5-3.0ContractingFaster257.054.0+3.0
Imports46.049.0-3.0ContractingFaster248.546.5+2.0
Inventory Sentiment66.062.5+3.5“Too High”Faster135N/AN/AN/A
Customers’ InventoriesN/AN/AN/AN/AN/AN/A54.547.0+7.5

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(a) Non-Manufacturing ISM Report On Business®data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. Manufacturing ISM Report On Business®data is seasonally adjusted for New Orders, Production, Employment, Supplier Deliveries and Inventories.

(b) Number of months moving in current direction

COMMODITIES REPORTED UP / DOWN IN PRICE, and IN SHORT SUPPLY

Commodities Up in Price

Airfares (6); Air Freight (2); Aluminum Products; Asparagus; Auto Fuel (3); Beef (6); Broccoli; Cable; Carbon Steel Pipe (3); Carpet; Cleaning Supplies; Copier Paper (7); Corrugated Products; #1 Diesel Fuel (4); #2 Diesel Fuel(c) (4); Exam Gloves; Food and Beverage (4); Food Products (4); Freight Charges (3); Freight Fuel Surcharges (3); Fuel(c) (19); Fuel Products (3); Fuel Surcharges (4); Gasoline(c) (12); #2 Heating Fuel (2); HVAC Equipment; IV Solutions; Latex Gloves (2); Medical and Surgical Supplies; Packaging; Paper (10); Paper Products (6); Petroleum Based Products (2); Piping Valves; Plastic Can Liners (3); Plastic Cups; Plastic Dinnerware; Plastic Pipe/Pipe Fittings; Poly Bags (3); Roofing Materials; Shipping Costs (6); Steel (6); Steel Pipe (3); Transportation Services (3); Travel Costs (2); Vehicle Rentals; and Wine.

Commodities Down in Price

Computer and Related Items; Copper Pipe; Copper Pipe Fittings; #2 Diesel Fuel(c); Fuel(c); Gasoline(c) (2); and Natural Gas.

Commodities in Short Supply

Latex Gloves is the only commodity reported in short supply.

Note: The number of consecutive months the commodity is listed is indicated after each item.

(c) Indicates reported both up and down in price.

AUGUST 2008 NON-MANUFACTURING INDEX SUMMARIES

NMI (Non-Manufacturing Index)

Beginning with the January 2008 Non-Manufacturing Report On Business®, a composite index is now calculated as an indicator of the overall economic condition for the non-manufacturing sector. The NMI is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. In August, the NMI at 50.6 percent indicates growth in the non-manufacturing sector. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.

The industries reporting growth in August are: Real Estate, Rental & Leasing; Mining; Health Care & Social Assistance; Educational Services; Utilities; Agriculture, Forestry, Fishing & Hunting; Construction; Professional, Scientific & Technical Services; Other Services(d); and Information. The industries reporting contraction in August are: Transportation & Warehousing; Finance & Insurance; Accommodation & Food Services; Wholesale Trade; Arts, Entertainment & Recreation; Management of Companies & Support Services; Retail Trade; and Public Administration.

NMI HISTORY

     Month     NMI          Month     NMI
 
Aug 200850.6Apr 200852.0
Jul 200849.5Mar 200849.6
Jun 200848.2Feb 200849.3
May 200851.7Jan 200844.6

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Business Activity

ISM’s Non-Manufacturing Business Activity Index in August registered 51.6 percent, an increase of 2 percentage points when compared to the 49.6 percent registered in July. Seven industries reported increased business activity, and seven industries reported decreased activity for the month of August. Four industries reported no change from July. Comments from respondents include: “New customer orders”; “Major project initiatives”; and “Commodity sales are up.”

The industries reporting growth of business activity in August are: Real Estate, Rental & Leasing; Health Care & Social Assistance; Professional, Scientific & Technical Services; Educational Services; Public Administration; Information; and Utilities. The industries reporting decreased business activity in August are: Transportation & Warehousing; Accommodation & Food Services; Management of Companies & Support Services; Retail Trade; Finance & Insurance; Wholesale Trade; and Arts, Entertainment & Recreation.

Business Activity     %Higher    %Same    %Lower    Index
 
Aug 200823532451.6
Jul 200824512549.6
Jun 200828522049.9
May 200832501853.6

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THE LAST 12 MONTHS

     Month     Business
Activity Index
          Month     Business
Activity Index
 
Aug 200851.6Feb 200850.8
Jul 200849.6Jan 200841.9
Jun 200849.9Dec 200754.4
May 200853.6Nov 200754.6
Apr 200850.9Oct 200755.5
Mar 200852.2Sep 200755.7
Average for 12 months – 51.7High – 55.7Low – 41.9

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New Orders

ISM’s Non-Manufacturing New Orders Index contracted in August for the third consecutive month. The index increased 1.8 percentage points to 49.7 percent from the 47.9 percent registered in July. Comments from respondents include: “Demand continues to ebb”; “Budget constraints”; and “Slower business activity and seasonal impacts.”

Industries reporting growth of new orders in August are: Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Educational Services; Information; Professional, Scientific & Technical Services; Utilities; Construction; and Public Administration. The industries reporting contraction of new orders in August are: Transportation & Warehousing; Wholesale Trade; Finance & Insurance; Arts, Entertainment & Recreation; Accommodation & Food Services; Retail Trade; and Management of Companies & Support Services.

New Orders     %Higher    %Same    %Lower    Index
 
Aug 200824512549.7
Jul 200820562447.9
Jun 200824552148.6
May 200829561553.6

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Employment

Employment activity in the non-manufacturing sector contracted in August for the seventh time in the last eight months. ISM’s Non-Manufacturing Employment Index for August registered 45.4 percent. This reflects a decrease of 1.7 percentage points when compared to the 47.1 percent registered in July. Six industries reported increased employment, 10 industries reported a decrease, and two industries indicated employment is unchanged from July. Comments from respondents include: “Cutting back for an expected slow/sluggish fourth quarter”; “Hiring freeze for all but essential positions”; and “We have experienced dismissals and retirements without replacements.”

The industries reporting growth in employment in August are: Mining; Agriculture, Forestry, Fishing & Hunting; Other Services(d); Educational Services; Professional, Scientific & Technical Services; and Health Care & Social Assistance. The industries reporting a reduction in employment in August are: Transportation & Warehousing; Arts, Entertainment & Recreation; Accommodation & Food Services; Finance & Insurance; Management of Companies & Support Services; Public Administration; Wholesale Trade; Construction; Real Estate, Rental & Leasing; and Utilities.

Employment     %Higher    %Same    %Lower    Index
 
Aug 200813622545.4
Jul 200819602147.1
Jun 200813681943.8
May 200818681448.7

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Supplier Deliveries

Supplier deliveries were slower in August, with the index registering 55.5 percent. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in August are: Construction; Utilities; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Retail Trade; Transportation & Warehousing; Health Care & Social Assistance; and Wholesale Trade. The industries reporting faster supplier deliveries in August are: Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; and Finance & Insurance.

Supplier Deliveries     %Slower    %Same    %Faster    Index
 
Aug 20081679555.5
Jul 20081577853.5
Jun 2008885750.5
May 20081082851.0

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Inventories

ISM’s Non-Manufacturing Inventories Index registered 53.5 percent in August, indicating that inventory levels grew in August for the fourth consecutive month. Of the total respondents in August, 28 percent indicated they do not have inventories or do not measure them. Comments from members include: “Inventory reduced to match reduced business”; “Conserving cash”; and “Inventory reduction plan.”

The industries reporting increases in inventories in August are: Mining; Agriculture, Forestry, Fishing & Hunting; Utilities; Health Care & Social Assistance; Information; and Retail Trade. The industries reporting decreases in inventories in August are: Management of Companies & Support Services; Public Administration; Wholesale Trade; Accommodation & Food Services; Arts, Entertainment & Recreation; and Real Estate, Rental & Leasing.

Inventories     %Higher    %Same    %Lower    Index
 
Aug 200820671353.5
Jul 200822651354.5
Jun 200824581853.0
May 200828522054.0

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Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in August for the 63rd consecutive month. ISM’s Non-Manufacturing Prices Index for August registered 72.9 percent, 7.9 percentage points lower than July’s index of 80.8 percent. In August, the percentage of respondents reporting higher prices is 50 percent, the percentage indicating no change in prices paid is 38 percent, and 12 percent of the respondents reported lower prices.

In August, 16 industries reported an increase in prices paid in the following order: Mining; Transportation & Warehousing; Management of Companies & Support Services; Utilities; Arts, Entertainment & Recreation; Retail Trade; Accommodation & Food Services; Health Care & Social Assistance; Public Administration; Finance & Insurance; Real Estate, Rental & Leasing; Other Services(d); Construction; Professional, Scientific & Technical Services; Educational Services; and Wholesale Trade. The two industries reporting prices as unchanged for the month of August are Information; and Agriculture, Forestry, Fishing & Hunting.

Prices     %Higher    %Same    %Lower    Index
 
Aug 200850381272.9
Jul 20086630480.8
Jun 20087226284.5
May 20086534177.0

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Backlog of Orders

ISM’s Non-Manufacturing Backlog of Orders Index contracted in August after one month of growth. The index registered 49 percent, 3 percentage points lower than the 52 percent reported in July. Of the total respondents in August, 44 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in August are: Utilities; Transportation & Warehousing; Real Estate, Rental & Leasing; Health Care & Social Assistance; and Information. The industries reporting lower backlog of orders in August are: Arts, Entertainment & Recreation; Wholesale Trade; Finance & Insurance; Public Administration; Professional, Scientific & Technical Services; and Construction.

Backlog of Orders     %Higher    %Same    %Lower    Index
 
Aug 200814701649.0
Jul 200820641652.0
Jun 200814701649.0
May 200816661849.0

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New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically based personnel indicated contraction in August for the second consecutive month. The New Export Orders Index for August registered 44.5 percent, compared to July’s index of 47.5 percent. Of the total respondents in August, 74 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The one industry reporting an increase in new export orders in August is Other Services(d). The industries reporting a decrease in export orders in August are: Arts, Entertainment & Recreation; Accommodation & Food Services; Transportation & Warehousing; Finance & Insurance; Wholesale Trade; and Retail Trade.

New Export Orders     %Higher    %Same    %Lower    Index
 
Aug 20089712044.5
Jul 200822512747.5
Jun 200824562052.0
May 200823621554.0

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Imports

The ISM Non-Manufacturing Imports Index registered 46 percent in August. The index is 3 percentage points lower than July’s index of 49 percent. In August, 56 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The one industry reporting an increase in the use of imports in August is Real Estate, Rental & Leasing. The industries reporting a decrease in imports for the month of August are: Transportation & Warehousing; Public Administration; Utilities; Wholesale Trade; Retail Trade; and Finance & Insurance.

Imports     %Higher    %Same    %Lower    Index
 
Aug 20085821346.0
Jul 200811761349.0
Jun 200812771150.5
May 200815661948.0

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Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index increased 3.5 percentage points to 66 percent in August, indicating that respondents still believe their inventories are too high at this time. In August, 34 percent of respondents said their inventories were too high, 2 percent said their inventories were too low, and 64 percent said their inventories were about right.

The industries reporting a feeling that their inventories are too high in August are: Real Estate, Rental & Leasing; Utilities; Retail Trade; Wholesale Trade; Accommodation & Food Services; Public Administration; Finance & Insurance; Health Care & Social Assistance; and Construction. The one industry reporting that their inventories are too low is Transportation & Warehousing.

Inventory Sentiment     %Too
High
    %About
Right
    %Too
Low
    Index
 
Aug 20083464266.0
Jul 20082967462.5
Jun 20082864860.0
May 20083563266.5

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(d) Other Services include: Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services.

About this Report

The data presented herein is obtained from a survey of non-manufacturing supply managers based on information they have collected within their respective organizations. ISM makes no representation, other than that stated within this release, regarding the individual company data collection procedures. Use of the data is in the public domain and should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation

The Non-Manufacturing ISM Report On Business® is based on data compiled from purchasing and supply executives nationwide. Membership of the Non-Manufacturing Business Survey Committee is diversified by NAICS, based on each industry’s contribution to gross domestic product (GDP). The Non-Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Other Services(d); and Public Administration.

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment and Supplier Deliveries), this report shows the percentage reporting each response, and the diffusion index. Responses represent raw data and are never changed. Data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The remaining indexes have not indicated significant seasonality.

The NMI is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. An index reading above 50 percent indicates that the non-manufacturing economy in that index is generally expanding; below 50 percent indicates that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries Index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

The Non-Manufacturing ISM Report On Business® is published monthly by the Institute for Supply Management™, the largest supply management research and education organization in the United States. The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM’s mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education.

The full text version of the Non-Manufacturing ISM Report On Business® is posted on ISM’s Web site at www.ism.ws on the third business day of every month after 10:10 a.m. (ET).

The next Non-Manufacturing ISM Report On Business® featuring the September 2008 data will be released at 10:00 a.m. (ET) on Friday, October 3, 2008.

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