NMI March 2008 Report

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

“Phase in of new machines to replace older ones — in inventory until deployment schedule is completed.”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 0.3 percentage point to 49.6 percent, indicating contraction for the third consecutive month within the non-manufacturing sector for March 2008. Non-manufacturing business activity increased for the second consecutive month. The New Orders Index increased 0.6 percentage point to 50.2 percent, and the Employment Index contracted for the third consecutive month, remaining at 46.9 percent. The Prices Index increased to 70.8 percent in March, indicating a faster rate in price increases than in February. According to the NMI, 11 non-manufacturing industries reported growth in March. Members’ comments in March are mixed and reflect concern about rising fuel and energy costs and the impact they are having on commodity prices.”

INDUSTRY PERFORMANCE (Based on the NMI)

The 11 industries reporting growth in March based on the new NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Mining; Agriculture, Forestry, Fishing & Hunting; Construction; Information; Other Services(d); Utilities; Retail Trade; Accommodation & Food Services; Health Care & Social Assistance; and Public Administration. The six industries reporting contraction in March are: Transportation & Warehousing; Wholesale Trade; Educational Services; Finance & Insurance; Management of Companies & Support Services; and Professional, Scientific & Technical Services.

WHAT RESPONDENTS ARE SAYING …

  • “Business has increased due in part to us reducing unit prices on all products. Sales traffic has increased and foreign buyers have made up the majority of the increased traffic.” (Construction)
  • “Continued stress in the financial markets across a broad base of factors continues to have impacts on overall business activity.” (Finance & Insurance)
  • “Outrageous, speculative oil prices are driving up petroleum-based products as well as delivery costs.” (Professional, Scientific & Technical Services)
  • “Although business levels are higher this month, the current trend is not as active for spending.” (Accommodation & Food Services)
  • “Activity levels ahead of plan, but reimbursement and overall revenues only tracking to plan. Continued concerns regarding erosion of returns on investment which are used to fund capital projects, pension plans, etc.” (Health Care & Social Assistance)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCECOMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS(a)MARCH 2008
  
IndexNon-ManufacturingManufacturing
Series
Index
Mar.
 Series
Index
Feb.
 Percent
Point
Change
 Direction Rate of
Change
 Trend(b)
(Months)
Series
Index
Mar.
 Series
Index
Feb.
 Percent
Point
Change
 
NMI/PMI49.649.3+0.3ContractingSlower348.648.3+0.3
Business Activity/Production52.250.8+1.4GrowingFaster248.750.7-2.0
New Orders50.249.6+0.6GrowingFrom
Contracting
146.549.1-2.6
Employment46.946.90.0ContractingSame349.246.0+3.2
Supplier Deliveries49.050.0-1.0FasterFrom
Unchanged
153.650.1+3.5
Inventories51.550.0+1.5GrowingFrom
Unchanged
144.945.4-0.5
Prices70.867.9+2.9IncreasingFaster5883.575.5+8.0
Backlog of Orders47.549.5-2.0ContractingFaster747.545.0+2.5
New Export Orders55.046.5+8.5GrowingFrom
Contracting
156.556.0+0.5
Imports54.549.0+5.5GrowingFrom
Contracting
145.047.5-2.5
Inventory Sentiment60.560.50.0“Too High”Same130N/AN/AN/A
Customers’ InventoriesN/AN/AN/AN/AN/AN/A51.049.0+2.0

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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

A/C Parts; Air Freight; Airline Tickets; All Fuel; All Oil Based Products; Aluminum; Aluminum Products; Auto Fuel; Automotive; Bakery Items; Beef; Bread; Carbon Steel Pipe; Construction Labor; Copier Paper (2); Copper Products; Copper Wire; Corrugated (2); Cut Paper; Diesel Fuel (6); #1 Diesel Fuel; #2 Diesel Fuel (6); Eggs; Energy; Freight Charges; Fuel (14); Fuel Products; Fuel Surcharges (3); Gasoline(c) (7); #2 Heating Fuel; Lighting Supplies; Nickel Products; Office Paper; Office Supplies (2); Oil; Paper (5); Paper Products; Pasta; Petroleum; Petroleum Products; Pipe; Plastic Bags; Plastic Products (2); Plumbing Products; Resin; Shipping Costs; Silver; Stainless Steel Products (2); Stainless Steel Sheet; Steel; Steel Plate; Steel Products (3); Steel Sheet; Textile Products; Toilet Paper; Toner; Trash Can Liners; and Wood Products.

Commodities Down in Price

Gasoline(c) (2) is the only commodity reported down in price.

Commodities in Short Supply

Coated Ground Wood (2) and Steel.

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

(c) Reported as both up and down in price.

MARCH 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. March’s NMI at 49.6 percent indicates a contraction 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 March are: Real Estate, Rental & Leasing; Mining; Agriculture, Forestry, Fishing & Hunting; Construction; Information; Other Services(d); Utilities; Retail Trade; Accommodation & Food Services; Health Care & Social Assistance; and Public Administration. The industries reporting contraction in March are: Transportation & Warehousing; Wholesale Trade; Educational Services; Finance & Insurance; Management of Companies & Support Services; and Professional, Scientific & Technical Services.

NMI HISTORY

     Month     NMI
 
March 200849.6
February 200849.3
January 200844.6

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Business Activity

ISM’s Non-Manufacturing Business Activity Index in March registered 52.2 percent, indicating an increase of 1.4 percentage points when compared to the 50.8 percent registered in February. Eleven industries reported increased business activity, and five industries reported decreased activity for the month of March. Two industries reported no change from February. Comments from respondents include: “Starting new projects”; “Customers releasing projects as well as successful bids on some new projects”; “Increased demand on existing projects”; and “Utility construction activity continues at a steady pace.”

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

Business Activity     %Higher    %Same    %Lower    Index
 
March 200830502052.2
February 200826472750.8
January 200818404241.9
December 200724542254.4

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THE LAST 12 MONTHS

     Month     Business
Activity Index
          Month     Business
Activity Index
 
Mar 200852.2Sep 200755.7
Feb 200850.8Aug 200756.3
Jan 200841.9Jul 200755.9
Dec 200754.4Jun 200759.7
Nov 200754.6May 200758.4
Oct 200755.5Apr 200756.0
Average for 12 months – 54.3High – 59.7Low – 41.9

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New Orders

ISM’s Non-Manufacturing New Orders Index grew in March after two consecutive months of contraction. The index increased 0.6 percentage point to 50.2 percent from the 49.6 percent registered in February. Comments from respondents include: “New customers, seasonal increase”; “Increased admissions and lengths of stay”; and “Seeing increased orders for later this year.”

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

New Orders     %Higher    %Same    %Lower    Index
 
March 200825522350.2
February 200824502649.6
January 200818463643.5
December 200725502553.9

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Employment

Employment activity in the non-manufacturing sector contracted in March for the third consecutive month. ISM’s Non-Manufacturing Employment Index for March registered the same as February at 46.9 percent. Five industries reported increased employment, six industries reported a decrease, and seven industries indicated employment is unchanged from February. Comments from respondents include: “Layoffs for general cost cutting”; “Hiring freeze due to budget constraints”; and “We have a few less employees and are not hiring presently.”

The industries reporting growth in employment in March are: Real Estate, Rental & Leasing; Accommodation & Food Services; Construction; Educational Services; and Professional, Scientific & Technical Services. The industries reporting a reduction in employment in March are: Other Services(d); Finance & Insurance; Wholesale Trade; Public Administration; Information; and Retail Trade.

Employment     %Higher    %Same    %Lower    Index
 
March 200814662046.9
February 200814632346.9
January 20086702443.9
December 200716711351.8

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Supplier Deliveries

Supplier deliveries were faster in March with the index registering 49 percent. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in March are: Agriculture, Forestry, Fishing & Hunting; Mining; Other Services(d); Management of Companies & Support Services; Health Care & Social Assistance; and Public Administration. The industries reporting faster supplier deliveries in March are: Wholesale Trade; Transportation & Warehousing; Utilities; Educational Services; Finance & Insurance; Professional, Scientific & Technical Services; and Information.

Supplier Deliveries     %Slower    %Same    %Faster    Index
 
March 2008784949.0
February 2008786750.0
January 20088821049.0
December 20071379852.5

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Inventories

ISM’s Non-Manufacturing Inventories Index registered 51.5 percent in March, indicating that inventory levels grew in March when compared to February. Of the total respondents in March, 27 percent indicated they do not have inventories or do not measure them. Comments from members include: “Stock piling paper inventory to minimize effect of future price increase”; “Lowering inventories to save cash”; and “Phase in of new machines to replace older ones — in inventory until deployment schedule is completed.”

The industries reporting increases in inventories in March are: Real Estate, Rental & Leasing; Information; Management of Companies & Support Services; Other Services(d); Transportation & Warehousing; Professional, Scientific & Technical Services; Public Administration; and Retail Trade. The industries reporting decreases in inventories in March are: Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Accommodation & Food Services; and Health Care & Social Assistance.

Inventories     %Higher    %Same    %Lower    Index
 
March 200822591951.5
February 200824522450.0
January 200814612544.5
December 200726492550.5

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Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in March for the 58th consecutive month. ISM’s Non-Manufacturing Prices Index for March registered 70.8 percent, 2.9 percentage points higher than February’s index of 67.9 percent. In March, the percentage of respondents reporting higher prices is 53 percent. The percentage indicating no change in prices paid is 45 percent. The percentage of respondents noting lower prices is at 2 percent.

In March, 17 out of 18 industries reported an increase in prices paid in the following order: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Accommodation & Food Services; Construction; Utilities; Management of Companies & Support Services; Educational Services; Public Administration; Mining; Professional, Scientific & Technical Services; Other Services(d); Retail Trade; Finance & Insurance; Information; Transportation & Warehousing; Wholesale Trade; and Health Care & Social Assistance. One industry, Agriculture, Forestry, Fishing & Hunting, reported prices unchanged in March.

Prices     %Higher    %Same    %Lower    Index
 
March 20085345270.8
February 20084154567.9
January 20084154570.7
December 20073761271.5

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Backlog of Orders

ISM’s Non-Manufacturing Backlog of Orders Index contracted in March for the seventh consecutive month, registering 47.5 percent, 2 percentage points lower than the 49.5 percent reported in February. Of the total respondents in March, 41 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in March are: Construction; Other Services(d); Retail Trade; and Public Administration. The industries reporting lower backlog of orders in March are: Management of Companies & Support Services; Educational Services; Information; Utilities; Accommodation & Food Services; Transportation & Warehousing; Finance & Insurance; Professional, Scientific & Technical Services; and Wholesale Trade.

Backlog of Orders     %Higher    %Same    %Lower    Index
 
March 200814671947.5
February 200823532449.5
January 200813662146.0
December 200720582249.0

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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 growth for the month of March. The New Export Orders Index for March registered 55 percent, compared to February’s index of 46.5 percent. Of the total respondents in March, 69 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 March are: Information; Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Mining; Other Services(d); and Retail Trade. The industries reporting a decrease in export orders in March are: Management of Companies & Support Services; Transportation & Warehousing; Accommodation & Food Services; and Finance & Insurance.

New Export Orders     %Higher    %Same    %Lower    Index
 
March 200826581655.0
February 200816612346.5
January 200821621752.0
December 200722562250.0

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Imports

The ISM Non-Manufacturing Imports Index registered 54.5 percent in March after two consecutive months of contraction. The index is 5.5 percentage points higher than February’s index of 49 percent. In March, 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 March are: Information; Arts, Entertainment & Recreation; Utilities; Other Services(d); Retail Trade; and Health Care & Social Assistance. The industries reporting a decrease in imports for the month of March are: Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; and Wholesale Trade.

Imports     %Higher    %Same    %Lower    Index
 
March 200820691154.5
February 200818622049.0
January 200810632741.5
December 200714731350.5

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Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index remained unchanged in March at 60.5 percent. This indicates that non-manufacturing purchasing and supply executives feel the same level of discomfort with the levels of inventory in both March and February. In March, 24 percent of respondents felt their inventories were too high, 3 percent indicated their inventories were too low, and 73 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in March are: Other Services(d); Transportation & Warehousing; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Information; Wholesale Trade; Health Care & Social Assistance; and Retail Trade. The industries reporting that their inventories are too low are: Construction and Public Administration.

Inventory Sentiment     %Too
High
    %About
Right
    %Too
Low
    Index
 
March 20082473360.5
February 20082963860.5
January 20082368957.0
December 20073265364.5

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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, 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 April 2008 data will be released at 10:00 a.m. (ET) on Monday, May 5, 2008.

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