NMI August 2015 Report
Economic activity in the non-manufacturing sector grew in August for the 67th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.
The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. “The NMI® registered 59 percent in August, 1.3 percentage points lower than the July reading of 60.3 percent. This represents continued growth in the non-manufacturing sector at a slower rate. The Non-Manufacturing Business Activity Index decreased to 63.9 percent, which is 1 percentage point lower than the July reading of 64.9 percent, reflecting growth for the 73rd consecutive month at a slower rate. The New Orders Index registered 63.4 percent, 0.4 percentage point lower than the reading of 63.8 percent in July. The Employment Index decreased 3.6 percentage points to 56 percent from the July reading of 59.6 percent and indicates growth for the 18th consecutive month. The Prices Index decreased 2.9 percentage points from the July reading of 53.7 percent to 50.8 percent, indicating prices increased in August for the sixth consecutive month. According to the NMI®, 15 non-manufacturing industries reported growth in August. Overall, respondents continue to be optimistic about business conditions and the economy. This is reflected by indexes that are again strong; however, lower than what was seen in July.”
INDUSTRY PERFORMANCE
The 15 non-manufacturing industries reporting growth in August — listed in order — are: Transportation & Warehousing; Real Estate, Rental & Leasing; Construction; Accommodation & Food Services; Retail Trade; Finance & Insurance; Public Administration; Health Care & Social Assistance; Educational Services; Utilities; Management of Companies & Support Services; Wholesale Trade; Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; and Information. The only industry reporting contraction in August is Mining.
WHAT RESPONDENTS ARE SAYING …
- “Overall business is increasing.” (Health Care & Social Assistance)
- “Business in commercial real estate and management thereof continues to be strong. Companies want to get out of directly managing brick and mortar structures and the systems that support those assets.” (Management of Companies & Support Services)
- “Business is good and do not see anything to slow it down.” (Construction)
- “Trending towards a positive year-end.” (Finance & Insurance)
- “Avian influenza has impacted the egg market taking 40 percent of the raw material out of the supply chain. Prices have doubled and shortages of liquid eggs have emerged.” (Accommodation & Food Services)
- “Some slowdown in business activity mostly due to vacations. Despite this, the variance still meets Q3 forecasted business level expectations.” (Professional, Scientific & Technical Services)
- “Business and our market sector continue to be strong with continued growth and stability.” (Retail Trade)
- “Sales continue to increase and port congestion on the East Coast is easing up. Intermodal transit time has increased by two days because of rail repairs.” (Wholesale Trade)
| ISM® NON-MANUFACTURING SURVEY RESULTS AT A GLANCECOMPARISON OF ISM® NON-MANUFACTURING AND ISM® MANUFACTURING SURVEYS*AUGUST 2015 | |||||||||
| Non-Manufacturing | Manufacturing | ||||||||
| Index | Series IndexAug | Series IndexJul | Percent Point Change | Direction | Rate of Change | Trend**(Months) | Series IndexAug | Series IndexJul | Percent Point Change |
| NMI®/PMI® | 59.0 | 60.3 | -1.3 | Growing | Slower | 67 | 51.1 | 52.7 | -1.6 |
| Business Activity/Production | 63.9 | 64.9 | -1.0 | Growing | Slower | 73 | 53.6 | 56.0 | -2.4 |
| New Orders | 63.4 | 63.8 | -0.4 | Growing | Slower | 73 | 51.7 | 56.5 | -4.8 |
| Employment | 56.0 | 59.6 | -3.6 | Growing | Slower | 18 | 51.2 | 52.7 | -1.5 |
| Supplier Deliveries | 52.5 | 53.0 | -0.5 | Slowing | Slower | 3 | 50.7 | 48.9 | +1.8 |
| Inventories | 54.5 | 57.0 | -2.5 | Growing | Slower | 5 | 48.5 | 49.5 | -1.0 |
| Prices | 50.8 | 53.7 | -2.9 | Increasing | Slower | 6 | 39.0 | 44.0 | -5.0 |
| Backlog of Orders | 56.5 | 54.0 | +2.5 | Growing | Faster | 3 | 46.5 | 42.5 | +4.0 |
| New Export Orders | 52.0 | 56.5 | -4.5 | Growing | Slower | 4 | 46.5 | 48.0 | -1.5 |
| Imports | 51.5 | 50.5 | +1.0 | Growing | Faster | 2 | 51.5 | 52.0 | -0.5 |
| Inventory Sentiment | 69.0 | 63.5 | +5.5 | Too High | Faster | 219 | N/A | N/A | N/A |
| Customers’ Inventories | N/A | N/A | N/A | N/A | N/A | N/A | 53.0 | 44.0 | +9.0 |
| Overall EconomyNon-Manufacturing Sector | GrowingGrowing | SlowerSlower | 7367 |
*Non-Manufacturing ISM® Report On Business® data is seasonally adjusted for Business Activity, New Orders, Prices and Employment Indexes. Manufacturing ISM® Report On Business® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries.
**Number of months moving in current direction.
COMMODITIES REPORTED UP/DOWN IN PRICE, AND IN SHORT SUPPLY
Commodities Up in Price
Bacon (2); Chicken (6); #1 Diesel Fuel*; Eggs (4); Fuel Prices; Gasoline* (8); Labor (4); and Produce Products (2).
Commodities Down in Price
Cartons; Cheese; Coffee; #1 Diesel Fuel*; Fuel; Gasoline* (2); Propane; Resin; and Salmon.
Commodities in Short Supply
Contract Administrators; Eggs (3); and Services Labor (7).
Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.
AUGUST 2015 NON-MANUFACTURING INDEX SUMMARIES
NMI®
In August, the NMI® registered 59 percent, a decrease of 1.3 percentage points when compared to July’s reading of 60.3 percent, indicating continued growth in the non-manufacturing sector for the 67th 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.
An NMI® in excess of 48.7 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the August NMI® indicates growth for the 73rd consecutive month in the overall economy, and indicates expansion in the non-manufacturing sector for the 67th consecutive month. Nieves stated, “The past relationship between the NMI® and the overall economy indicates that the NMI® for August (59 percent) corresponds to a 4.4 percent increase in real gross domestic product (GDP) on an annualized basis.”
NMI® HISTORY
| Month | NMI® | Month | NMI® |
| Aug 2015 | 59.0 | Feb 2015 | 56.9 |
| Jul 2015 | 60.3 | Jan 2015 | 56.7 |
| Jun 2015 | 56.0 | Dec 2014 | 56.5 |
| May 2015 | 55.7 | Nov 2014 | 58.8 |
| Apr 2015 | 57.8 | Oct 2014 | 56.9 |
| Mar 2015 | 56.5 | Sep 2014 | 58.1 |
| Average for 12 months – 57.4High – 60.3Low – 55.7 |
Business Activity
ISM®‘s Business Activity Index in August registered 63.9 percent, a decrease of 1 percentage point from July’s reading of 64.9 percent. This represents growth in business activity for the 73rd consecutive month. Fourteen industries reported increased business activity, and one industry reported decreased activity for the month of August. Comments from respondents include: “New acquisition” and “Continued market growth has fueled more business activity. Many new projects are starting.”
The 14 industries reporting growth of business activity in August — listed in order — are: Arts, Entertainment & Recreation; Transportation & Warehousing; Construction; Retail Trade; Finance & Insurance; Health Care & Social Assistance; Public Administration; Real Estate, Rental & Leasing; Educational Services; Management of Companies & Support Services; Professional, Scientific & Technical Services; Utilities; Accommodation & Food Services; and Wholesale Trade. The only industry reporting a decrease in business activity in August is Mining.
| Business Activity | %Higher | %Same | %Lower | Index |
| Aug 2015 | 38 | 51 | 11 | 63.9 |
| Jul 2015 | 40 | 50 | 10 | 64.9 |
| Jun 2015 | 35 | 50 | 15 | 61.5 |
| May 2015 | 39 | 47 | 14 | 59.5 |
New Orders
ISM®‘s Non-Manufacturing New Orders Index grew in August for the 73rd consecutive month at a slower rate compared to July. The index registered 63.4 percent, a decrease of 0.4 percentage point from the July reading of 63.8 percent. Comments from respondents include: “New customers, network upgrades” and “Successful promotion/new business.”
The 13 industries reporting growth of new orders in August — listed in order — are: Construction; Transportation & Warehousing; Finance & Insurance; Public Administration; Utilities; Real Estate, Rental & Leasing; Accommodation & Food Services; Retail Trade; Health Care & Social Assistance; Professional, Scientific & Technical Services; Wholesale Trade; Information; and Management of Companies & Support Services. The only industry reporting contraction of new orders in August is Mining.
| New Orders | %Higher | %Same | %Lower | Index |
| Aug 2015 | 32 | 60 | 8 | 63.4 |
| Jul 2015 | 36 | 54 | 10 | 63.8 |
| Jun 2015 | 33 | 51 | 16 | 58.3 |
| May 2015 | 34 | 54 | 12 | 57.9 |
Employment
Employment activity in the non-manufacturing sector grew in August for the 18th consecutive month. ISM®‘s Non-Manufacturing Employment Index registered 56 percent, which reflects a decrease of 3.6 percentage points when compared to July’s reading of 59.6 percent. Twelve industries reported increased employment, and three industries reported decreased employment. Comments from respondents include: “Ramping up for a new client coming onboard” and “Insourcing responsibilities.”
The 12 industries reporting an increase in employment in August — listed in order — are: Accommodation & Food Services; Transportation & Warehousing; Real Estate, Rental & Leasing; Management of Companies & Support Services; Wholesale Trade; Educational Services; Finance & Insurance; Retail Trade; Utilities; Construction; Health Care & Social Assistance; and Public Administration. The three industries reporting a reduction in employment in August are: Mining; Arts, Entertainment & Recreation; and Professional, Scientific & Technical Services.
| Employment | %Higher | %Same | %Lower | Index |
| Aug 2015 | 28 | 55 | 17 | 56.0 |
| Jul 2015 | 33 | 57 | 10 | 59.6 |
| Jun 2015 | 29 | 56 | 15 | 52.7 |
| May 2015 | 28 | 61 | 11 | 55.3 |
Supplier Deliveries
Supplier Deliveries slowed in August as the index registered 52.5 percent, which is 0.5 percentage point lower than the 53 percent registered in July. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries.
The 10 industries reporting slower deliveries in August — listed in order — are: Real Estate, Rental & Leasing; Educational Services; Accommodation & Food Services; Construction; Wholesale Trade; Retail Trade; Public Administration; Health Care & Social Assistance; Utilities; and Professional, Scientific & Technical Services. The three industries reporting faster deliveries in August are: Mining; Finance & Insurance; and Transportation & Warehousing.
| Supplier Deliveries | %Slower | %Same | %Faster | Index |
| Aug 2015 | 8 | 89 | 3 | 52.5 |
| Jul 2015 | 11 | 84 | 5 | 53.0 |
| Jun 2015 | 7 | 89 | 4 | 51.5 |
| May 2015 | 8 | 84 | 8 | 50.0 |
Inventories
ISM®‘s Non-Manufacturing Inventories grew for the fifth consecutive month and registered 54.5 percent in August, which is 2.5 percentage points lower than the 57 percent that was reported in July. Of the total respondents in August, 30 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Burning off contingency stock put in place during port strike planning” and “More inventory turns, but same level.”
The eight industries reporting an increase in inventories in August — listed in order — are: Utilities; Public Administration; Transportation & Warehousing; Wholesale Trade; Construction; Accommodation & Food Services; Health Care & Social Assistance; and Information. The six industries reporting decreases in inventories in August — listed in order — are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Professional, Scientific & Technical Services; Retail Trade; Finance & Insurance; and Mining.
| Inventories | %Higher | %Same | %Lower | Index |
| Aug 2015 | 21 | 67 | 12 | 54.5 |
| Jul 2015 | 25 | 64 | 11 | 57.0 |
| Jun 2015 | 26 | 58 | 16 | 55.0 |
| May 2015 | 23 | 56 | 21 | 51.0 |
Prices
Prices paid by non-manufacturing organizations for purchased materials and services increased in August for the sixth consecutive month. ISM®‘s Non-Manufacturing Prices Index for August registered 50.8 percent, 2.9 percentage points lower than the 53.7 percent reported in July. The proportion of respondents reporting higher prices is 11 percent, 77 percent indicated no change in prices paid, and 12 percent of the respondents reported lower prices.
The five non-manufacturing industries reporting an increase in prices paid during the month of August are: Finance & Insurance; Educational Services; Transportation & Warehousing; Health Care & Social Assistance; and Utilities. The eight industries reporting a decrease in prices paid for the month of August — listed in order — are: Mining; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Information; Public Administration; Construction; Retail Trade; and Professional, Scientific & Technical Services.
| Prices | %Higher | %Same | %Lower | Index |
| Aug 2015 | 11 | 77 | 12 | 50.8 |
| Jul 2015 | 14 | 80 | 6 | 53.7 |
| Jun 2015 | 18 | 72 | 10 | 53.0 |
| May 2015 | 20 | 73 | 7 | 55.9 |
NOTE: Commodities reported as up in price and down in price are listed in the commodities section of this report.
Backlog of Orders
ISM®‘s Non-Manufacturing Backlog of Orders Index grew in August for the third consecutive month. The index registered 56.5 percent, which is 2.5 percentage points higher than the 54 percent that was reported in July. Of the total respondents in August, 40 percent indicated they do not measure backlog of orders.
The nine industries reporting an increase in order backlogs in August — listed in order — are: Construction; Finance & Insurance; Information; Real Estate, Rental & Leasing; Accommodation & Food Services; Public Administration; Professional, Scientific & Technical Services; Wholesale Trade; and Transportation & Warehousing. The five industries reporting a decrease in order backlogs in August are: Mining; Arts, Entertainment & Recreation; Utilities; Other Services; and Retail Trade.
| Backlog of Orders | %Higher | %Same | %Lower | Index |
| Aug 2015 | 24 | 65 | 11 | 56.5 |
| Jul 2015 | 21 | 66 | 13 | 54.0 |
| Jun 2015 | 15 | 71 | 14 | 50.5 |
| May 2015 | 14 | 69 | 17 | 48.5 |
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 for the fourth consecutive month. The New Export Orders Index for August registered 52 percent, which is 4.5 percentage points lower than the 56.5 percent reported in July. Of the total respondents in August, 69 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.
The four industries reporting an increase in new export orders in August are: Construction; Accommodation & Food Services; Retail Trade; and Professional, Scientific & Technical Services. The only industry reporting a decrease in new export orders in August is Mining. Nine industries reported no change in new export orders in August compared to July.
| New Export Orders | %Higher | %Same | %Lower | Index |
| Aug 2015 | 9 | 86 | 5 | 52.0 |
| Jul 2015 | 23 | 67 | 10 | 56.5 |
| Jun 2015 | 10 | 84 | 6 | 52.0 |
| May 2015 | 19 | 72 | 9 | 55.0 |
Imports
The ISM® Non-Manufacturing Imports Index grew in August for the second consecutive month. This month’s reading at 51.5 percent is 1 percentage point higher than the reading of 50.5 percent reported in July. Fifty-six percent of respondents reported that they do not use, or do not track the use of, imported materials.
The six industries reporting an increase in imports for the month of August — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Public Administration; Professional, Scientific & Technical Services; Wholesale Trade; and Retail Trade. The two industries reporting a decrease in imports for the month of August are: Mining; and Other Services.
| Imports | %Higher | %Same | %Lower | Index |
| Aug 2015 | 11 | 81 | 8 | 51.5 |
| Jul 2015 | 12 | 77 | 11 | 50.5 |
| Jun 2015 | 6 | 84 | 10 | 48.0 |
| May 2015 | 17 | 73 | 10 | 53.5 |
Inventory Sentiment
The ISM® Non-Manufacturing Inventory Sentiment Index in August registered 69 percent, which is 5.5 percentage points higher than the 63.5 percent reported in July. This indicates that respondents believe their inventories are still too high at this time. In August, 39 percent of respondents said their inventories were too high, 1 percent said their inventories were too low, and 60 percent said their inventories were about right.
The 12 industries reporting a feeling that their inventories are too high in August — listed in order — are: Mining; Arts, Entertainment & Recreation; Other Services; Wholesale Trade; Construction; Management of Companies & Support Services; Accommodation & Food Services; Transportation & Warehousing; Information; Finance & Insurance; Retail Trade; and Utilities.
| Inventory Sentiment | %Too High | %About Right | %Too Low | Index |
| Aug 2015 | 39 | 60 | 1 | 69.0 |
| Jul 2015 | 33 | 61 | 6 | 63.5 |
| Jun 2015 | 33 | 64 | 3 | 65.0 |
| May 2015 | 24 | 70 | 6 | 59.0 |
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. The data 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 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 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.
An NMI® in excess of 48.7 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 48.7 percent, it is generally declining. The distance from 50 percent or 48.7 percent is indicative of the strength of the expansion or decline.
The Non-Manufacturing ISM® Report On Business® survey is sent out to Non-Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the third business day of the following month.
The industries reporting growth, as indicated in the Non-Manufacturing ISM® Report On Business® monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.
About Institute for Supply Management®
Founded in 1915 as the first supply management institute in the world, Institute for Supply Management® (ISM®) is committed to advancing the practice of supply chain management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. This year, ISM celebrates 100 years of leading, innovating and guiding the profession through the renowned ISM Report On Business®, highly regarded certification programs, and industry-standard training and educational resources. ISM is a not-for-profit organization with global influence, serving supply chain professionals in more than 90 countries.
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