NMI August 2011 Report
Economic activity in the non-manufacturing sector grew in August for the 21st consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.
“Focusing on inventory reduction metrics as we approach fiscal year-end.”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. “The NMI registered 53.3 percent in August, 0.6 percentage point higher than the 52.7 percent registered in July, and indicating continued growth at a slightly faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased 0.5 percentage point to 55.6 percent, reflecting growth for the 25th consecutive month, but at a slower rate than in July. The New Orders Index increased by 1.1 percentage points to 52.8 percent. The Employment Index decreased 0.9 percentage point to 51.6 percent, indicating growth in employment for the 12th consecutive month, but at a slower rate than in July. The Prices Index increased 7.6 percentage points to 64.2 percent, indicating that prices increased at a faster rate in August when compared to July. According to the NMI, 10 non-manufacturing industries reported growth in August. Respondents’ comments remain mixed. There is a degree of uncertainty concerning business conditions for the balance of the year.”
INDUSTRY PERFORMANCE (Based on the NMI)
The 10 non-manufacturing industries reporting growth in August based on the NMI composite index — listed in order — are: Mining; Information; Retail Trade; Wholesale Trade; Transportation & Warehousing; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Utilities; Public Administration; and Professional, Scientific & Technical Services. The five industries reporting contraction in August are: Educational Services; Arts, Entertainment & Recreation; Management of Companies & Support Services; Health Care & Social Assistance; and Finance & Insurance.
WHAT RESPONDENTS ARE SAYING …
- “Overall prices paid are increasing, while sales are still slightly behind projections.” (Public Administration)
- “This month we have seen a downward trend in sales activities due to weather and economic conditions.” (Construction)
- “Customer traffic is trending lower, but spending per person continues to increase. Labor cost savings realized through attrition, as fewer replacements are hired. The outlook for the remainder of 2011 is cautiously optimistic, with increased investment in marketing. ‘Sticky prices’ are keeping operating expenses elevated even as commodity supply eases.” (Arts, Entertainment & Recreation)
- “We had a good first half. Starting to see inflation in many of our input costs. Consumer demand is flat.” (Agriculture, Forestry, Fishing & Hunting)
- “Business is holding, but looking weaker toward fourth quarter.” (Professional, Scientific & Technical Services)
- “Business climate uncertainty is increasing.” (Management of Companies & Support Services)
| ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS(a) AUGUST 2011 | |||||||||||||||||||
| Index | Non-Manufacturing | Manufacturing | |||||||||||||||||
| Series Index Aug | Series Index Jul | Percent Point Change | Direction | Rate of Change | Trend(b) (Months) | Series Index Aug | Series Index Jul | Percent Point Change | |||||||||||
| NMI/PMI | 53.3 | 52.7 | +0.6 | Growing | Faster | 21 | 50.6 | 50.9 | -0.3 | ||||||||||
| Business Activity/Production | 55.6 | 56.1 | -0.5 | Growing | Slower | 25 | 48.6 | 52.3 | -3.7 | ||||||||||
| New Orders | 52.8 | 51.7 | +1.1 | Growing | Faster | 25 | 49.6 | 49.2 | +0.4 | ||||||||||
| Employment | 51.6 | 52.5 | -0.9 | Growing | Slower | 12 | 51.8 | 53.5 | -1.7 | ||||||||||
| Supplier Deliveries | 53.0 | 50.5 | +2.5 | Slowing | Faster | 17 | 50.6 | 50.4 | +0.2 | ||||||||||
| Inventories | 53.5 | 56.5 | -3.0 | Growing | Slower | 7 | 52.3 | 49.3 | +3.0 | ||||||||||
| Prices | 64.2 | 56.6 | +7.6 | Increasing | Faster | 25 | 55.5 | 59.0 | -3.5 | ||||||||||
| Backlog of Orders | 47.5 | 44.0 | +3.5 | Contracting | Slower | 3 | 46.0 | 45.0 | +1.0 | ||||||||||
| New Export Orders | 56.5 | 49.0 | +7.5 | Growing | From Contracting | 1 | 50.5 | 54.0 | -3.5 | ||||||||||
| Imports | 53.5 | 47.5 | +6.0 | Growing | From Contracting | 1 | 55.5 | 53.5 | +2.0 | ||||||||||
| Inventory Sentiment | 56.0 | 59.5 | -3.5 | Too High | Slower | 171 | N/A | N/A | N/A | ||||||||||
| Customers’ Inventories | N/A | N/A | N/A | N/A | N/A | N/A | 46.5 | 44.0 | +2.5 |
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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
Abrasives; Airfares(c) (9); Aluminum Based Products; Automobile Starters; Carbon Steel Plate; Computer and Peripherals; Copper Based Products; Cotton(c); D-Limonene; #1 Diesel Fuel(c); #2 Diesel Fuel(c) (14); Food and Beverage; Freight Charges; Fuel (20); Gasoline(c) (11); Gloves; Healthcare Related; Labor; Latex Gloves; Petroleum Products (8); Plastic Resins; Rental Equipment; Repair Parts; Resin Products; Soy Oil; 3/4-Ton Pickup Trucks (4X4); and Transmissions/Heavy Duty Vehicles.
Commodities Down in Price
Airfares(c); Cotton(c); #1 Diesel Fuel(c); #2 Diesel Fuel(c); and Gasoline(c) (3).
Commodities in Short Supply
Helium is the only commodity reported in short supply.
Note: The number of consecutive months the commodity is listed is indicated after each item.
(c) Reported as both up and down in price.
AUGUST 2011 NON-MANUFACTURING INDEX SUMMARIES
NMI
In August, the NMI registered 53.3 percent, indicating continued growth in the non-manufacturing sector for the 21st consecutive month. 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.
NMI HISTORY
| Month | NMI | Month | NMI | ||||||||||||||||||||||||||||||||||||||||
| Aug 2011 | 53.3 | Feb 2011 | 59.7 | ||||||||||||||||||||||||||||||||||||||||
| Jul 2011 | 52.7 | Jan 2011 | 59.4 | ||||||||||||||||||||||||||||||||||||||||
| Jun 2011 | 53.3 | Dec 2010 | 57.1 | ||||||||||||||||||||||||||||||||||||||||
| May 2011 | 54.6 | Nov 2010 | 56.0 | ||||||||||||||||||||||||||||||||||||||||
| Apr 2011 | 52.8 | Oct 2010 | 54.6 | ||||||||||||||||||||||||||||||||||||||||
| Mar 2011 | 57.3 | Sep 2010 | 53.9 | ||||||||||||||||||||||||||||||||||||||||
| Average for 12 months – 55.4 High – 59.7 Low – 52.7 |
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Business Activity
ISM’s Non-Manufacturing Business Activity Index in August registered 55.6 percent, a decrease of 0.5 percentage point when compared to the 56.1 percent registered in July. Eight industries reported increased business activity, and five industries reported decreased activity for the month of August. Comments from respondents include: “Consumers are pulling back on worries of the economy and possible job layoffs” and “New business and additional capital expense approvals.”
The industries reporting growth of business activity in August — listed in order — are: Mining; Accommodation & Food Services; Information; Utilities; Finance & Insurance; Transportation & Warehousing; Wholesale Trade; and Public Administration. The five industries reporting decreased business activity in August are: Arts, Entertainment & Recreation; Educational Services; Construction; Health Care & Social Assistance; and Retail Trade.
| Business Activity | %Higher | %Same | %Lower | Index | |||||||||||||||||
| Aug 2011 | 27 | 54 | 19 | 55.6 | |||||||||||||||||
| Jul 2011 | 30 | 50 | 20 | 56.1 | |||||||||||||||||
| Jun 2011 | 33 | 50 | 17 | 53.4 | |||||||||||||||||
| May 2011 | 29 | 57 | 14 | 53.6 |
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New Orders
ISM’s Non-Manufacturing New Orders Index grew in August for the 25th consecutive month. The index registered 52.8 percent, an increase of 1.1 percentage points from the 51.7 percent reported in July. Comments from respondents include: “More work coming online” and “Increasing capital project expenditures.”
The six industries reporting growth of new orders in August — listed in order — are: Accommodation & Food Services; Mining; Transportation & Warehousing; Professional, Scientific & Technical Services; Information; and Wholesale Trade. The six industries reporting contraction of new orders in August — listed in order — are: Educational Services; Health Care & Social Assistance; Finance & Insurance; Public Administration; Retail Trade; and Construction. Six industries reported no change in new orders in August compared to July.
| New Orders | %Higher | %Same | %Lower | Index | |||||||||||||||||
| Aug 2011 | 27 | 50 | 23 | 52.8 | |||||||||||||||||
| Jul 2011 | 24 | 55 | 21 | 51.7 | |||||||||||||||||
| Jun 2011 | 28 | 56 | 16 | 53.6 | |||||||||||||||||
| May 2011 | 32 | 54 | 14 | 56.8 |
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Employment
Employment activity in the non-manufacturing sector grew in August, as ISM’s Non-Manufacturing Employment Index registered 51.6 percent. This reflects a decrease of 0.9 percentage point when compared to the 52.5 percent registered in July. Six industries reported increased employment, nine industries reported decreased employment, and three industries reported unchanged employment compared to July. Comments from respondents include “Adding staff to keep up with increased customer demand” and “Still understaffed even as business improves.”
The industries reporting an increase in employment in August — listed in order — are: Mining; Retail Trade; Agriculture, Forestry, Fishing & Hunting; Information; Transportation & Warehousing; and Wholesale Trade. The industries reporting a reduction in employment in August — listed in order — are: Arts, Entertainment & Recreation; Educational Services; Management of Companies & Support Services; Accommodation & Food Services; Other Services; Finance & Insurance; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Public Administration.
| Employment | %Higher | %Same | %Lower | Index | ||||||||||||||||
| Aug 2011 | 16 | 69 | 15 | 51.6 | ||||||||||||||||
| Jul 2011 | 27 | 58 | 15 | 52.5 | ||||||||||||||||
| Jun 2011 | 27 | 61 | 12 | 54.1 | ||||||||||||||||
| May 2011 | 28 | 63 | 9 | 54.0 |
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Supplier Deliveries
The Supplier Deliveries Index registered 53 percent in August, 2.5 percentage points higher than the 50.5 percent registered in July, indicating that supplier deliveries continued to slow in August. A reading above 50 percent indicates slower deliveries.
The 10 industries reporting slower deliveries in August — listed in order — are: Utilities; Arts, Entertainment & Recreation; Other Services; Retail Trade; Wholesale Trade; Mining; Information; Public Administration; Construction; and Health Care & Social Assistance. The three industries reporting faster supplier deliveries in August are: Educational Services; Transportation & Warehousing; and Finance & Insurance. Five industries reported no change in supplier deliveries in August compared to July.
| Supplier Deliveries | %Slower | %Same | %Faster | Index | |||||||||||||||||
| Aug 2011 | 10 | 86 | 4 | 53.0 | |||||||||||||||||
| Jul 2011 | 7 | 87 | 6 | 50.5 | |||||||||||||||||
| Jun 2011 | 9 | 86 | 5 | 52.0 | |||||||||||||||||
| May 2011 | 14 | 80 | 6 | 54.0 |
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Inventories
ISM’s Non-Manufacturing Inventories Index registered 53.5 percent in August, 3 percentage points lower than the 56.5 percent reading that was reported in July. Of the total respondents in August, 27 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Keeping higher levels of critical items on hand” and “Focusing on inventory reduction metrics as we approach fiscal year-end.”
The six industries reporting an increase in inventories in August — listed in order — are: Utilities; Mining; Transportation & Warehousing; Accommodation & Food Services; Professional, Scientific & Technical Services; and Construction. The seven industries reporting decreases in inventories in August — listed in order — are: Arts, Entertainment & Recreation; Health Care & Social Assistance; Finance & Insurance; Information; Retail Trade; Public Administration; and Management of Companies & Support Services.
| Inventories | %Higher | %Same | %Lower | Index | |||||||||||||||||
| Aug 2011 | 21 | 65 | 14 | 53.5 | |||||||||||||||||
| Jul 2011 | 24 | 65 | 11 | 56.5 | |||||||||||||||||
| Jun 2011 | 23 | 61 | 16 | 53.5 | |||||||||||||||||
| May 2011 | 26 | 58 | 16 | 55.0 |
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Prices
Prices paid by non-manufacturing organizations for purchased materials and services increased substantially in August. ISM’s Non-Manufacturing Prices Index for August registered 64.2 percent, 7.6 percentage points higher than the 56.6 percent reported in July. In August, the percentage of respondents reporting higher prices is 28 percent, the percentage indicating no change in prices paid is 64 percent, and 8 percent of the respondents reported lower prices.
Fifteen non-manufacturing industries reported an increase in prices paid, in the following order: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Wholesale Trade; Other Services; Accommodation & Food Services; Finance & Insurance; Construction; Retail Trade; Educational Services; Professional, Scientific & Technical Services; Mining; Health Care & Social Assistance; Public Administration; and Transportation & Warehousing. The two industries reporting a decrease in prices paid are: Management of Companies & Support Services; and Information.
| Prices | %Higher | %Same | %Lower | Index | |||||||||||||||||
| Aug 2011 | 28 | 64 | 8 | 64.2 | |||||||||||||||||
| Jul 2011 | 30 | 61 | 9 | 56.6 | |||||||||||||||||
| Jun 2011 | 35 | 58 | 7 | 60.9 | |||||||||||||||||
| May 2011 | 53 | 42 | 5 | 69.6 |
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Backlog of Orders
ISM’s Non-Manufacturing Backlog of Orders Index contracted in August for the third consecutive month. The index registered 47.5 percent, 3.5 percentage points higher than the 44 percent reported in July. Of the total respondents in August, 39 percent indicated they do not measure backlog of orders.
The three industries reporting an increase in order backlogs in August are: Wholesale Trade; Professional, Scientific & Technical Services; and Mining. The eight industries reporting lower backlog of orders in August — listed in order — are: Information; Accommodation & Food Services; Management of Companies & Support Services; Utilities; Construction; Finance & Insurance; Health Care & Social Assistance; and Retail Trade. Six industries reported no change in order backlogs for the month of August compared to July.
| Backlog of Orders | %Higher | %Same | %Lower | Index | |||||||||||||||||
| Aug 2011 | 14 | 67 | 19 | 47.5 | |||||||||||||||||
| Jul 2011 | 6 | 76 | 18 | 44.0 | |||||||||||||||||
| Jun 2011 | 12 | 73 | 15 | 48.5 | |||||||||||||||||
| May 2011 | 18 | 74 | 8 | 55.0 |
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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 grew in August after one month of contraction. The New Export Orders Index for August registered 56.5 percent, which is 7.5 percentage points higher than the 49 percent reported in July. Of the total respondents in August, 61 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.
The 10 industries reporting an increase in new export orders in August — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Construction; Other Services; Public Administration; Mining; Retail Trade; Finance & Insurance; Accommodation & Food Services; and Professional, Scientific & Technical Services. The three industries reporting a decrease in export orders in August are: Educational Services; Information; and Wholesale Trade.
| New Export Orders | %Higher | %Same | %Lower | Index | |||||||||||||||||
| Aug 2011 | 20 | 73 | 7 | 56.5 | |||||||||||||||||
| Jul 2011 | 17 | 64 | 19 | 49.0 | |||||||||||||||||
| Jun 2011 | 20 | 74 | 6 | 57.0 | |||||||||||||||||
| May 2011 | 20 | 74 | 6 | 57.0 |
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Imports
The ISM Non-Manufacturing Imports Index grew in August following two consecutive months of contraction. The index registered 53.5 percent, which is 6 percentage points higher than the 47.5 percent reported in July. Fifty-four percent of respondents reported that they do not use, or do not track, the use of imported materials.
The five industries reporting an increase in the use of imports in August are: Agriculture, Forestry, Fishing & Hunting; Construction; Accommodation & Food Services; Wholesale Trade; and Professional, Scientific & Technical Services. The three industries reporting a decrease in imports for the month of August are: Arts, Entertainment & Recreation; Information; and Transportation & Warehousing. Ten industries reported no change in imports for the month of August compared to July.
| Imports | %Higher | %Same | %Lower | Index | |||||||||||||||||
| Aug 2011 | 13 | 81 | 6 | 53.5 | |||||||||||||||||
| Jul 2011 | 14 | 67 | 19 | 47.5 | |||||||||||||||||
| Jun 2011 | 6 | 81 | 13 | 46.5 | |||||||||||||||||
| May 2011 | 11 | 79 | 10 | 50.5 |
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Inventory Sentiment
The ISM Non-Manufacturing Inventory Sentiment Index in August registered 56 percent, which is 3.5 percentage points lower than the 59.5 percent reported in July. This indicates that respondents believe their inventories are still too high at this time. In August, 23 percent of respondents said their inventories were too high, 11 percent said their inventories were too low, and 66 percent said their inventories were about right.
The five industries reporting a feeling that their inventories are too high in August are: Information; Finance & Insurance; Management of Companies & Support Services; Utilities; and Wholesale Trade. The three industries reporting that inventories are too low in August are: Health Care & Social Assistance; Professional, Scientific & Technical Services; and Construction. Eight industries reported no change in inventory sentiment in August compared to July.
| Inventory Sentiment | %Too High | %About Right | %Too Low | Index | |||||||||||||||||
| Aug 2011 | 23 | 66 | 11 | 56.0 | |||||||||||||||||
| Jul 2011 | 27 | 65 | 8 | 59.5 | |||||||||||||||||
| Jun 2011 | 24 | 69 | 7 | 58.5 | |||||||||||||||||
| May 2011 | 23 | 64 | 13 | 55.0 |
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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; Public Administration; and Other Services (services such as 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).
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 (Non-Manufacturing Index) 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 2011 data will be released at 10:00 a.m. (ET) on Wednesday, October 5, 2011.