NMI March 2014 Report

Economic activity in the non-manufacturing sector grew in March for the 50th 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 53.1 percent in March, 1.5 percentage points higher than February’s reading of 51.6 percent. The Non-Manufacturing Business Activity Index decreased to 53.4 percent, which is 1.2 percentage points lower than the reading of 54.6 percent reported in February, reflecting growth for the 56th consecutive month but at a slower rate. The New Orders Index registered 53.4 percent, 2.1 percentage points higher than the reading of 51.3 percent registered in February. The Employment Index increased 6.1 percentage points to 53.6 percent from the February reading of 47.5 percent and indicates substantial growth after one month of contraction. The Prices Index increased 4.6 percentage points from the February reading of 53.7 percent to 58.3 percent, indicating prices increased at a faster rate in March when compared to February. According to the NMI^®, 13 non-manufacturing industries reported growth in March. Despite the affects of weather on many of the respective businesses, the majority of respondents indicate that business conditions are improving. The respondents also project better business activity and economic conditions as weather conditions continue to improve.”

INDUSTRY PERFORMANCE
The 13 non-manufacturing industries reporting growth in March — listed in order — are:   Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Construction; Utilities; Management of Companies & Support Services; Wholesale Trade; Finance & Insurance; Arts, Entertainment & Recreation; Accommodation & Food Services; Retail Trade; Public Administration; Information; and Professional, Scientific & Technical Services. The five industries reporting contraction in March are:Mining; Educational Services; Health Care & Social Assistance; Real Estate, Rental & Leasing; and Other Services.

WHAT RESPONDENTS ARE SAYING …

• “Outlook remains positive.” (Information)
• “Cold weather played more havoc on revenue, causing steep declines for nearly a week, and then picked up well beyond expectations. Overall, per capita spending increases, but frequency of visits are down; net neutral to slightly positive.” (Arts, Entertainment & Recreation)
• “Demand is rising; while at the same time there is pressure to reduce staffing expenses.” (Finance & Insurance)
• “Healthcare reform continues to adversely impact hospital projected/actual revenue.” (Health Care & Social Assistance)
• “Weather in Northeast – lost business days/business travel and site visits impacted. Energy costs rapidly increasing.” (Professional, Scientific & Technical Services)
• “Business was a little slower than expected due to harsh weather conditions across much of the country, but we expect a rebound as spring approaches.” (Retail Trade)
• “Economic environment continues to moderate slowly.” (Management of Companies & Support Services)

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

Commodities Up in Price
Airfares; Bacon; Beef Items (4); Cheese (2); Coffee (2); Copier Paper (2); Crab; Dairy (4); #1 Diesel Fuel (3); #2 Diesel Fuel (4); #2 Heating Fuel (2); Gasoline (4); Paper Products; Pharmaceuticals (2); Plastic Film (2); Plastic Products (2); Pork Products; Produce; Professional Labor; Propane (3); and Transportation. 

Commodities Down in Price
Chicken (4); and Copper Products.

Commodities in Short Supply
Beef Trimmings; Medical IV Solutions (3); and Road Salt (2).

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

MARCH 2014 NON-MANUFACTURING INDEX SUMMARIES

NMI^®
In March, the NMI^® registered 53.1 percent, an increase of 1.5 percentage points when compared to February’s reading of 51.6 percent indicating continued growth in the non-manufacturing sector for the 50th 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

Business Activity
ISM^®‘s Business Activity Index in March registered 53.4 percent, 1.2 percentage points lower than February’s reading of 54.6 percent. Twelve industries reported increased business activity, and five industries reported decreased activity for the month of March. Comments from respondents include: “Improving economy” and “Early stages of additional capital projects.”

The industries reporting growth of business activity in March — listed in order — are:   Agriculture, Forestry, Fishing & Hunting; Utilities; Construction; Retail Trade; Accommodation & Food Services; Management of Companies & Support Services; Finance & Insurance; Transportation & Warehousing; Professional, Scientific & Technical Services; Public Administration; Wholesale Trade; and Information. The industries reporting decreased business activity in March are: Mining; Educational Services; Other Services; Health Care & Social Assistance; and Arts, Entertainment & Recreation.

New Orders
ISM^®‘s Non-Manufacturing New Orders Index grew in March for the 56th consecutive month. The index registered 53.4 percent, an increase of 2.1 percentage points from the February reading of 51.3 percent. Comments from respondents include: “Some additional proposal work” and “More bids in the market.”

The 13 industries reporting growth of new orders in March — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Utilities; Management of Companies & Support Services; Arts, Entertainment & Recreation; Retail Trade; Finance & Insurance; Information; Accommodation & Food Services; Wholesale Trade; Construction; Public Administration; and Professional, Scientific & Technical Services. The three industries reporting contraction of new orders in March are: Mining; Educational Services; and Health Care & Social Assistance.

Employment
Employment activity in the non-manufacturing sector grew in March after one month of contraction. ISM^®‘s Non-Manufacturing Employment Index registered 53.6 percent, which reflects a notable increase of 6.1 percentage points when compared to the reading of 47.5 percent registered in February. This reading reflects the largest month-over-month increase in Employment since ISM^® began the Non-Manufacturing Report On Business^® in January 1998. Nine industries reported increased employment, and four industries reported decreased employment. Comments from respondents include: “New positions filled” and “Added business.”

The nine industries reporting an increase in employment in March — listed in order — are: Arts, Entertainment & Recreation; Wholesale Trade; Management of Companies & Support Services; Finance & Insurance; Construction; Public Administration; Retail Trade; Professional, Scientific & Technical Services; and Utilities. The four industries reporting a reduction in employment in March are: Mining; Real Estate, Rental & Leasing; Health Care & Social Assistance; and Information.

Supplier Deliveries
The Supplier Deliveries Index registered 52 percent in March, indicating that deliveries were slower after the February reading of 53 percent. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries.

The nine industries reporting slower deliveries in March — listed in order — are: Transportation & Warehousing; Other Services; Utilities; Construction; Wholesale Trade; Health Care & Social Assistance; Information; Accommodation & Food Services; and Public Administration. The five industries reporting faster deliveries in March are: Mining; Educational Services; Retail Trade; Professional, Scientific & Technical Services; and Finance & Insurance.

Inventories
ISM^®‘s Non-Manufacturing Inventories Index indicated contraction after two consecutive months of growth. The index registered 48 percent, which is 2.5 percentage points lower than the 50.5 percent reported in February. Of the total respondents in March, 29 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Removing surplus and obsolete items from inventory” and “Drawing down on existing inventory; long lead for new.”

The five industries reporting an increase in inventories in March are: Mining; Other Services; Wholesale Trade; Professional, Scientific & Technical Services; and Accommodation & Food Services.  The eight industries reporting decreases in inventories in March — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Public Administration; Retail Trade; Finance & Insurance; Construction; Information; Health Care & Social Assistance; and Utilities.

Prices
Prices paid by non-manufacturing organizations for purchased materials and services increased in March for the 54th consecutive month. ISM^®‘s Non-Manufacturing Prices Index for March registered 58.3 percent, 4.6 percentage points higher than the 53.7 percent reported in February. The percentage of respondents reporting higher prices is 28 percent, the percentage indicating no change in prices paid is 68 percent, and 4 percent of the respondents reported lower prices.

Thirteen non-manufacturing industries reported an increase in prices paid during the month of March, in the following order: Mining; Agriculture, Forestry, Fishing & Hunting; Utilities; Arts, Entertainment & Recreation; Wholesale Trade; Retail Trade; Educational Services; Accommodation & Food Services; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Public Administration; Health Care & Social Assistance; and Finance & Insurance. The three industries reporting a decrease in prices paid during March in the following order are: Transportation & Warehousing; Management of Companies & Support Services; and Information. 

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 March for the second consecutive month. The index registered 51.5 percent, which is 0.5 percentage point lower than the 52 percent reported in February. Of the total respondents in March, 39 percent indicated they do not measure backlog of orders.

The six industries reporting an increase in order backlogs in March — listed in order — are: Real Estate, Rental & Leasing; Utilities; Health Care & Social Assistance; Professional, Scientific & Technical Services; Public Administration; and Finance & Insurance. The three industries reporting a decrease in order backlogs are: Mining; Other Services; and Retail Trade. Nine industries reported no change in order backlogs in March compared to February.  

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 contracted in March for the third consecutive month. The New Export Orders Index for March registered 49.5 percent, which is 2 percentage points higher than the 47.5 percent reported in February. Of the total respondents in March, 68 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 March are: Management of Companies & Support Services; Information; Finance & Insurance; and Accommodation & Food Services.  The three industries reporting a decrease in export orders in March are: Other Services; Wholesale Trade; and Professional, Scientific & Technical Services. Nine industries reported no change in export orders in March compared to February.

Imports
The ISM^® Non-Manufacturing Imports Index grew in March after two consecutive months of contraction. This month’s reading at 50.5 percent is 3.5 percentage points higher than the 47 percent that was reported in February. Fifty-eight 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 imports for the month of March are: Agriculture, Forestry, Fishing & Hunting; Construction; Public Administration; Information; and Retail Trade. The four industries reporting a decrease in imports for the month of March are: Transportation & Warehousing; Accommodation & Food Services; Wholesale Trade; and Utilities. Eight industries reported no change in imports for the month of March compared to February.

Inventory Sentiment
The ISM^® Non-Manufacturing Inventory Sentiment Index in March registered 60.5 percent, which is 1.5 percentage points lower than the 62 percent reported in February. This indicates that respondents believe their inventories are still too high at this time. In March, 28 percent of respondents said their inventories were too high, 7 percent said their inventories were too low, and 65 percent said their inventories were about right.

The eight industries reporting a feeling that their inventories are too high in March — listed in order — are: Mining; Other Services; Health Care & Social Assistance; Wholesale Trade; Utilities; Finance & Insurance; Retail Trade; and Information. No industry reported a feeling that their inventories are too low. Nine industries reported no change in inventory sentiment for the month of March compared to February.  

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 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^® 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.

The Non-Manufacturing ISM^® Report On Business^® is published monthly by Institute for Supply Management^®, the first supply institute in the world. Founded in 1915, ISM^®‘s mission is to enhance the value and performance of procurement and supply chain management practitioners and their organizations worldwide. By executing and extending its mission through education, research, standards of excellence and information dissemination — including the renowned monthly ISM^® Report On Business^® — ISM^® maintains a strong global influence among individuals and organizations. ISM^® is a not-for-profit educational association that serves professionals with an interest in supply management who live and work in more than 80 countries.

The full text version of the Non-Manufacturing ISM^® Report On Business^® is posted on ISM^®‘s website 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 2014 data will be released at 10:00 a.m. (ET) on Monday, May 5, 2014.