NMI June 2008 Report
Economic activity in the non-manufacturing sector contracted in June, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.
“Energy costs are beyond the pain point. They are disruptive to every part of our business.”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) decreased 3.5 percentage points in June to 48.2 percent, indicating contraction after two consecutive months of growth within the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased 3.7 percentage points to 49.9 percent. The New Orders Index decreased 5 percentage points to 48.6 percent, and the Employment Index decreased 4.9 percentage points to 43.8 percent. The Prices Index increased 7.5 percentage points to 84.5 percent in June, indicating a faster rate in price increases than in May. The Prices Index is at its highest level since this report began. According to the NMI, eight non-manufacturing industries reported growth in June. Members’ comments in June indicate that rising fuel, energy and commodity costs are negatively impacting their respective businesses. Respondents’ comments are mixed on business conditions and the overall economy.”
INDUSTRY PERFORMANCE (Based on the NMI)
The eight industries reporting growth in June based on the new NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Mining; Educational Services; Construction; Utilities; Information; and Wholesale Trade. The eight industries reporting contraction in June are: Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Other Services(c); Health Care & Social Assistance; Finance & Insurance; Public Administration; Management of Companies & Support Services; and Retail Trade.
WHAT RESPONDENTS ARE SAYING …
- “Oil prices are affecting most every supplier we have.” (Transportation & Warehousing)
- “Energy costs are beyond the pain point. They are disruptive to every part of our business.” (Agriculture, Forestry, Fishing & Hunting)
- “Challenging due to continuing cost pressure from suppliers. Planning on decreased production activity as summer wears on and budgets tighten.” (Other Services(c))
- “High cost of commodities, fuel prices, are impacting margins and economic conditions are negatively impacting traffic counts and average check amounts.” (Accommodation & Food Services)
- “Energy cost is starting to have an effect on cost of products from all sectors.” (Wholesale Trade)
| ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCECOMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS(a)JUNE 2008 | ||||||||||||||||||
| Index | Non-Manufacturing | Manufacturing | ||||||||||||||||
| Series Index June | Series Index May | Percent Point Change | Direction | Rate of Change | Trend(b) (Months) | Series Index June | Series Index May | Percent Point Change | ||||||||||
| NMI/PMI | 48.2 | 51.7 | -3.5 | Contracting | From Growing | 1 | 50.2 | 49.6 | +0.6 | |||||||||
| Business Activity/Production | 49.9 | 53.6 | -3.7 | Contracting | From Growing | 1 | 51.5 | 51.2 | +0.3 | |||||||||
| New Orders | 48.6 | 53.6 | -5.0 | Contracting | From Growing | 1 | 49.6 | 49.7 | -0.1 | |||||||||
| Employment | 43.8 | 48.7 | -4.9 | Contracting | Faster | 2 | 43.7 | 45.5 | -1.8 | |||||||||
| Supplier Deliveries | 50.5 | 51.0 | -0.5 | Slowing | Slower | 3 | 55.1 | 53.7 | +1.4 | |||||||||
| Inventories | 53.0 | 54.0 | -1.0 | Growing | Slower | 2 | 51.2 | 48.0 | +3.2 | |||||||||
| Prices | 84.5 | 77.0 | +7.5 | Increasing | Faster | 61 | 91.5 | 87.0 | +4.5 | |||||||||
| Backlog of Orders | 49.0 | 49.0 | 0.0 | Contracting | Same | 2 | 47.5 | 46.0 | +1.5 | |||||||||
| New Export Orders | 52.0 | 54.0 | -2.0 | Growing | Slower | 2 | 58.5 | 59.5 | -1.0 | |||||||||
| Imports | 50.5 | 48.0 | +2.5 | Growing | From Contracting | 1 | 46.0 | 49.5 | -3.5 | |||||||||
| Inventory Sentiment | 60.0 | 66.5 | -6.5 | “Too High” | Slower | 133 | N/A | N/A | N/A | |||||||||
| Customers’ Inventories | N/A | N/A | N/A | N/A | N/A | N/A | 55.0 | 47.0 | +8.0 |
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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
Aircraft Fuel (2); Airfares (4); Aluminum Based Products (2); Appliances; Appliance Parts; Asphalt; Asphalt Construction; Asphalt Products; Auto Fuel; Bacon; Baked Goods; Bananas; Bath Tissue; Beef (4); Biomedical Waste Disposal Containers; Bread (2); Bubble Wrap; Car Rentals (3); Carbon Pipe — Seamless; Carpet; Caustic Soda; Cereal; Cheese (2); Chicken; Copier Paper (5); Copper (2); Corrugated Packaging (2); Dairy; Deliveries; Diesel Fuel (9); #1 Diesel Fuel (2); #2 Diesel Fuel (2); Food and Beverage (2); Food Products (2); Freight Charges; Freight Fuel Surcharges; Freight Services; Fuel (17); Fuel Products; Fuel Surcharges (2); Fuel Transportation; Gasoline (10); Gasoline Related (2); Hotels; Medical Supplies (2); Natural Gas; Office and Computer Supplies; Oil Based Products (2); Paper (8); Paper Products (4); Pipe Fittings (2); Plastics (2); Plastic Base Resins; Plastic Can Liners; Plastic Films; Poly Bags; Polyethylene Resins; Roof Felt; Shipping Costs (4); Shipping Surcharges; Soft Drinks; Stainless Steel Products (2); Steel (4); Steel Conduit; Steel Driven Items; Steel Pipe and Fittings; Steel Plate; Steel Products (2); Transportation Costs (2); Transportation Services; and #10 Window Envelopes.
Commodities Down in Price
Cable; Copper Pipe; Electrical Products; and Wire Cable.
Commodities in Short Supply
No commodities are reported short in supply.
Note: The number of consecutive months the commodity is listed is indicated after each item.
JUNE 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. June’s NMI at 48.2 percent indicates contraction in the non-manufacturing sector after two consecutive months of growth. 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 June are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Mining; Educational Services; Construction; Utilities; Information; and Wholesale Trade. The industries reporting contraction in June are: Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Other Services(c); Health Care & Social Assistance; Finance & Insurance; Public Administration; Management of Companies & Support Services; and Retail Trade.
NMI HISTORY
| Month | NMI | ||||||||||
| June 2008 | 48.2 | ||||||||||
| May 2008 | 51.7 | ||||||||||
| April 2008 | 52.0 | ||||||||||
| March 2008 | 49.6 | ||||||||||
| February 2008 | 49.3 | ||||||||||
| January 2008 | 44.6 |
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Business Activity
ISM’s Non-Manufacturing Business Activity Index in June registered 49.9 percent, a decrease of 3.7 percentage points when compared to the 53.6 percent registered in May. Ten industries reported increased business activity, and four industries reported decreased activity for the month of June. Four industries reported no change from May. Comments from respondents include: “Fewer job orders, expressions of interest from prospects/clients”; “Reduced capacity due to fuel prices”; and “Slower booking rate.”
The industries reporting growth of business activity in June are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Mining; Educational Services; Information; Utilities; Construction; Transportation & Warehousing; Wholesale Trade; and Management of Companies & Support Services. The industries reporting decreased business activity in June are: Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Health Care & Social Assistance; and Professional, Scientific & Technical Services.
| Business Activity | %Higher | %Same | %Lower | Index | |||||||||||||||||
| June 2008 | 28 | 52 | 20 | 49.9 | |||||||||||||||||
| May 2008 | 32 | 50 | 18 | 53.6 | |||||||||||||||||
| April 2008 | 29 | 53 | 18 | 50.9 | |||||||||||||||||
| March 2008 | 30 | 50 | 20 | 52.2 |
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THE LAST 12 MONTHS
| Month | Business Activity Index | Month | Business Activity Index | |||||||||||||||||||||||||
| June 2008 | 49.9 | Dec 2007 | 54.4 | |||||||||||||||||||||||||
| May 2008 | 53.6 | Nov 2007 | 54.6 | |||||||||||||||||||||||||
| Apr 2008 | 50.9 | Oct 2007 | 55.5 | |||||||||||||||||||||||||
| Mar 2008 | 52.2 | Sep 2007 | 55.7 | |||||||||||||||||||||||||
| Feb 2008 | 50.8 | Aug 2007 | 56.3 | |||||||||||||||||||||||||
| Jan 2008 | 41.9 | Jul 2007 | 55.9 | |||||||||||||||||||||||||
| Average for 12 months – 52.6High – 56.3Low – 41.9 |
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New Orders
ISM’s Non-Manufacturing New Orders Index contracted in June after three consecutive months of growth. The index decreased 5 percentage points to 48.6 percent from the 53.6 percent registered in May. Comments from respondents include: “Customer cutbacks”; “Fewer leads or prospects”; and “General slowdown being observed.”
Industries reporting growth of new orders in June are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Construction; Mining; Transportation & Warehousing; Utilities; Management of Companies & Support Services; Educational Services; Finance & Insurance; and Information. The industries reporting contraction of new orders in June are: Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Health Care & Social Assistance; Retail Trade; Wholesale Trade; and Public Administration.
| New Orders | %Higher | %Same | %Lower | Index | |||||||||||||||||
| June 2008 | 24 | 55 | 21 | 48.6 | |||||||||||||||||
| May 2008 | 29 | 56 | 15 | 53.6 | |||||||||||||||||
| April 2008 | 26 | 57 | 17 | 50.1 | |||||||||||||||||
| March 2008 | 25 | 52 | 23 | 50.2 |
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Employment
Employment activity in the non-manufacturing sector contracted in June for the fifth time in the last six months. ISM’s Non-Manufacturing Employment Index for June registered 43.8 percent. This reflects a decrease of 4.9 percentage points when compared to the 48.7 percent registered in May. Six industries reported increased employment, eight industries reported a decrease, and four industries indicated employment is unchanged from May. Comments from respondents include: “Incremental downsizing”; “Some positions eliminated”; and “We still have a significant number of open positions.”
The industries reporting growth in employment in June are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Information; Utilities; Professional, Scientific & Technical Services; and Accommodation & Food Services. The industries reporting a reduction in employment in June are: Other Services(c); Finance & Insurance; Transportation & Warehousing; Health Care & Social Assistance; Management of Companies & Support Services; Public Administration; Educational Services; and Wholesale Trade.
| Employment | %Higher | %Same | %Lower | Index | |||||||||||||||||
| June 2008 | 13 | 68 | 19 | 43.8 | |||||||||||||||||
| May 2008 | 18 | 68 | 14 | 48.7 | |||||||||||||||||
| April 2008 | 22 | 61 | 17 | 50.8 | |||||||||||||||||
| March 2008 | 14 | 66 | 20 | 46.9 |
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Supplier Deliveries
Supplier deliveries were slower in June, with the index registering 50.5 percent. A reading above 50 percent indicates slower deliveries.
The industries reporting slowing in supplier deliveries in June are: Educational Services; Health Care & Social Assistance; Retail Trade; and Wholesale Trade. The industries reporting faster supplier deliveries in June are: Agriculture, Forestry, Fishing & Hunting; Information; Management of Companies & Support Services; Transportation & Warehousing; Finance & Insurance; and Public Administration.
| Supplier Deliveries | %Slower | %Same | %Faster | Index | |||||||||||||||||
| June 2008 | 8 | 85 | 7 | 50.5 | |||||||||||||||||
| May 2008 | 10 | 82 | 8 | 51.0 | |||||||||||||||||
| April 2008 | 17 | 78 | 5 | 56.0 | |||||||||||||||||
| March 2008 | 7 | 84 | 9 | 49.0 |
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Inventories
ISM’s Non-Manufacturing Inventories Index registered 53 percent in June, indicating that inventory levels grew for the second consecutive month in June after contracting in April. Of the total respondents in June, 28 percent indicated they do not have inventories or do not measure them. Comments from members include: “Adding critical spare parts” and “Stock up against steel increases.”
The industries reporting increases in inventories in June are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Mining; Other Services(c); Retail Trade; Professional, Scientific & Technical Services; Finance & Insurance; Information; and Health Care & Social Assistance. The industries reporting decreases in inventories in June are: Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Wholesale Trade; Management of Companies & Support Services; and Public Administration.
| Inventories | %Higher | %Same | %Lower | Index | |||||||||||||||||
| June 2008 | 24 | 58 | 18 | 53.0 | |||||||||||||||||
| May 2008 | 28 | 52 | 20 | 54.0 | |||||||||||||||||
| April 2008 | 17 | 60 | 23 | 47.0 | |||||||||||||||||
| March 2008 | 22 | 59 | 19 | 51.5 |
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Prices
Prices paid by non-manufacturing organizations for purchased materials and services increased in June for the 61st consecutive month. ISM’s Non-Manufacturing Prices Index for June registered 84.5 percent, 7.5 percentage points higher than May’s index of 77 percent. June’s reading is the highest reading for the Prices Index since the Non-Manufacturing report began. In June, the percentage of respondents reporting higher prices is 72 percent, the percentage indicating no change in prices paid is 26 percent, and 2 percent of the respondents reported lower prices.
In June, 17 industries reported an increase in prices paid in the following order: Mining; Construction; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Finance & Insurance; Educational Services; Management of Companies & Support Services; Accommodation & Food Services; Professional, Scientific & Technical Services; Other Services(c); Wholesale Trade; Public Administration; Utilities; Retail Trade; Transportation & Warehousing; Information; and Health Care & Social Assistance. The one industry reporting no change is Agriculture, Forestry, Fishing & Hunting. No industry reported a decrease in prices paid.
| Prices | %Higher | %Same | %Lower | Index | |||||||||||||||||
| June 2008 | 72 | 26 | 2 | 84.5 | |||||||||||||||||
| May 2008 | 65 | 34 | 1 | 77.0 | |||||||||||||||||
| April 2008 | 60 | 38 | 2 | 72.1 | |||||||||||||||||
| March 2008 | 53 | 45 | 2 | 70.8 |
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Backlog of Orders
ISM’s Non-Manufacturing Backlog of Orders Index contracted in June. The index registered 49 percent, the same as reported in May. Of the total respondents in June, 46 percent indicated they do not measure backlog of orders.
The industries reporting an increase in order backlogs in June are: Construction; Information; Accommodation & Food Services; and Wholesale Trade. The industries reporting lower backlog of orders in June are: Agriculture, Forestry, Fishing & Hunting; Utilities; Other Services(c); Professional, Scientific & Technical Services; and Public Administration.
| Backlog of Orders | %Higher | %Same | %Lower | Index | |||||||||||||||||
| June 2008 | 14 | 70 | 16 | 49.0 | |||||||||||||||||
| May 2008 | 16 | 66 | 18 | 49.0 | |||||||||||||||||
| April 2008 | 15 | 70 | 15 | 50.0 | |||||||||||||||||
| March 2008 | 14 | 67 | 19 | 47.5 |
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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 growth for the month of June. The New Export Orders Index for June registered 52 percent, compared to May’s index of 54 percent. Of the total respondents in June, 68 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.
The industries reporting an increase in new export orders in June are: Information; Arts, Entertainment & Recreation; Finance & Insurance; Other Services(c); Wholesale Trade; and Retail Trade. The industries reporting a decrease in export orders in June are: Health Care & Social Assistance; Public Administration; Management of Companies & Support Services; Transportation & Warehousing; and Construction.
| New Export Orders | %Higher | %Same | %Lower | Index | |||||||||||||||||
| June 2008 | 24 | 56 | 20 | 52.0 | |||||||||||||||||
| May 2008 | 23 | 62 | 15 | 54.0 | |||||||||||||||||
| April 2008 | 18 | 61 | 21 | 48.5 | |||||||||||||||||
| March 2008 | 26 | 58 | 16 | 55.0 |
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Imports
The ISM Non-Manufacturing Imports Index registered 50.5 percent in June. The index is 2.5 percentage points higher than May’s index of 48 percent. In June, 60 percent of respondents reported that they do not use, or do not track, the use of imported materials.
The industries reporting an increase in the use of imports in June are: Information; Arts, Entertainment & Recreation; and Other Services(c). The industries reporting a decrease in imports for the month of June are: Public Administration; Agriculture, Forestry, Fishing & Hunting; and Transportation & Warehousing.
| Imports | %Higher | %Same | %Lower | Index | |||||||||||||||||
| June 2008 | 12 | 77 | 11 | 50.5 | |||||||||||||||||
| May 2008 | 15 | 66 | 19 | 48.0 | |||||||||||||||||
| April 2008 | 16 | 68 | 16 | 50.0 | |||||||||||||||||
| March 2008 | 20 | 69 | 11 | 54.5 |
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Inventory Sentiment
The ISM Non-Manufacturing Inventory Sentiment Index decreased 6.5 percentage points to 60 percent in June, indicating that respondents still believe their inventories are too high at this time. In June, 28 percent of respondents said their inventories were too high, 8 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 June are: Other Services(c); Information; Wholesale Trade; Professional, Scientific & Technical Services; Construction; Retail Trade; and Transportation & Warehousing. The two industries reporting that their inventories are too low are: Public Administration and Management of Companies & Support Services.
| Inventory Sentiment | %Too High | %About Right | %Too Low | Index | |||||||||||||||||
| June 2008 | 28 | 64 | 8 | 60.0 | |||||||||||||||||
| May 2008 | 35 | 63 | 2 | 66.5 | |||||||||||||||||
| April 2008 | 28 | 70 | 2 | 63.0 | |||||||||||||||||
| March 2008 | 24 | 73 | 3 | 60.5 |
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(c) 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(c); 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, the net difference between the number of responses in the positive economic direction (higher and slower for Supplier Deliveries) and the negative economic direction (lower and faster for Supplier Deliveries). 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 July 2008 data will be released at 10:00 a.m. (ET) on Tuesday, August 5, 2008.