NMI May 2008 Report
Economic activity in the non-manufacturing sector expanded in May, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.
“Economic and market conditions continue to weigh down financial services industry in general. Spending and employment growth are on hold until overall market conditions show improvement.”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 0.3 percentage point in May to 51.7 percent, indicating expansion for the second consecutive month within the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 2.7 percentage points to 53.6 percent. The New Orders Index increased 3.5 percentage points to 53.6 percent, and the Employment Index decreased 2.1 percentage points to 48.7 percent. The Prices Index increased 4.9 percentage points to 77 percent in May, indicating a faster rate in price increases than in April. According to the NMI, 13 non-manufacturing industries reported growth in May. Members’ comments in May reflect concern about business conditions, inclusive of rising costs, and the overall economy.”
INDUSTRY PERFORMANCE (Based on the NMI)
The 13 industries reporting growth in May based on the new NMI composite index — listed in order — are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Construction; Information; Public Administration; Mining; Educational Services; Utilities; Wholesale Trade; Other Services(c); Professional, Scientific & Technical Services; Accommodation & Food Services; and Health Care & Social Assistance. The four industries reporting contraction in May are: Finance & Insurance; Management of Companies & Support Services; Transportation & Warehousing; and Agriculture, Forestry, Fishing & Hunting.
WHAT RESPONDENTS ARE SAYING …
- “Business activity for the last month has increased slightly over the previous month.” (Professional, Scientific & Technical Services)
- “High energy prices hurting the cost and sell side of our business.” (Agriculture, Forestry, Fishing & Hunting)
- “Economic and market conditions continue to weigh down financial services industry in general. Spending and employment growth are on hold until overall market conditions show improvement.” (Finance & Insurance)
- “The economy continues to be pressured by high fuel costs and food costs in general. The consumer seems to approach spending with trepidation given all the uncertainty in the markets.” (Accommodation & Food Services)
- “Business is picking up.” (Retail Trade)
| ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCECOMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS(a)MAY 2008 | ||||||||||||||||||
| Index | Non-Manufacturing | Manufacturing | ||||||||||||||||
| Series Index May | Series Index Apr. | Percent Point Change | Direction | Rate of Change | Trend(b) (Months) | Series Index May | Series Index Apr. | Percent Point Change | ||||||||||
| NMI/PMI | 51.7 | 52.0 | -0.3 | Growing | Slower | 2 | 49.6 | 48.6 | +1.0 | |||||||||
| Business Activity/Production | 53.6 | 50.9 | +2.7 | Growing | Faster | 4 | 51.2 | 49.1 | +2.1 | |||||||||
| New Orders | 53.6 | 50.1 | +3.5 | Growing | Faster | 3 | 49.7 | 46.5 | +3.2 | |||||||||
| Employment | 48.7 | 50.8 | -2.1 | Contracting | From Growing | 1 | 45.5 | 45.4 | +0.1 | |||||||||
| Supplier Deliveries | 51.0 | 56.0 | -5.0 | Slowing | Slower | 2 | 53.7 | 54.0 | -0.3 | |||||||||
| Inventories | 54.0 | 47.0 | +7.0 | Growing | From Contracting | 1 | 48.0 | 48.1 | -0.1 | |||||||||
| Prices | 77.0 | 72.1 | +4.9 | Increasing | Faster | 60 | 87.0 | 84.5 | +2.5 | |||||||||
| Backlog of Orders | 49.0 | 50.0 | -1.0 | Contracting | From Unchanged | 1 | 46.0 | 51.5 | -5.5 | |||||||||
| New Export Orders | 54.0 | 48.5 | +5.5 | Growing | From Contracting | 1 | 59.5 | 57.5 | +2.0 | |||||||||
| Imports | 48.0 | 50.0 | -2.0 | Contracting | From Unchanged | 1 | 49.5 | 48.0 | +1.5 | |||||||||
| Inventory Sentiment | 66.5 | 63.0 | +3.5 | “Too High” | Faster | 132 | N/A | N/A | N/A | |||||||||
| Customers’ Inventories | N/A | N/A | N/A | N/A | N/A | N/A | 47.0 | 45.0 | +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
Aircraft Fuel; Airfares (3); Air Freight; Aluminum; Aluminum Based Products; Beef (3); Bread; Bronze Bushings; Car Rentals (2); Carbon Steel; Cheese; Copier Paper (4); Copper; Copper Wire (3); Corrugated Packaging; Diesel Fuel (8); #1 Diesel Fuel; #2 Diesel Fuel; Energy Costs; Energy Related; Film — All Grades; Food and Beverage; Food Products; Fuel (16); Fuel Related; Fuel Surcharges; Gasoline (9); Gasoline Related; #2 Heating Fuel; Maintenance Services; Medical Supplies; Oil (3); Oil Based Products; Packaging Materials; Paper (7); Paper Products (3); Petroleum (3); Petroleum Products; Pipe Fittings; Plastics; Poly Products; Print Media; Purchasing Personnel; Rice; Roof Shingles; Shipping Costs (3); Stainless Steel Products; Steel (3); Steel Products; Textiles; 551 Toners; Transportation Costs; Trash Can Liners; Travel; and Wheat Based Products.
Commodities Down in Price
No commodities are reported down in price.
Commodities in Short Supply
Skilled Labor is the only commodity reported in short supply.
Note: The number of consecutive months the commodity is listed is indicated after each item.
MAY 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. May’s NMI at 51.7 percent indicates growth in the non-manufacturing sector for the second 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.
The industries reporting growth in May are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Construction; Information; Public Administration; Mining; Educational Services; Utilities; Wholesale Trade; Other Services(c); Professional, Scientific & Technical Services; Accommodation & Food Services; and Health Care & Social Assistance. The four industries reporting contraction in May are: Finance & Insurance; Management of Companies & Support Services; Transportation & Warehousing; and Agriculture, Forestry, Fishing & Hunting.
NMI HISTORY
| Month | NMI | ||||||||||
| 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 May registered 53.6 percent, indicating an increase of 2.7 percentage points when compared to the 50.9 percent registered in April. Eleven industries reported increased business activity, and three industries reported decreased activity for the month of May. Four industries reported no change from April. Comments from respondents include: “New orders released by customers and additional requests for proposals for new projects”; “Increased demand for healthcare services”; and “End of budget year spend-out.”
The industries reporting growth of business activity in May are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Information; Public Administration; Wholesale Trade; Utilities; Health Care & Social Assistance; Other Services(c); Professional, Scientific & Technical Services; Educational Services; and Retail Trade. The industries reporting decreased business activity in May are: Finance & Insurance; Management of Companies & Support Services; and Transportation & Warehousing.
| Business Activity | %Higher | %Same | %Lower | Index | |||||||||||||||||
| May 2008 | 32 | 50 | 18 | 53.6 | |||||||||||||||||
| April 2008 | 29 | 53 | 18 | 50.9 | |||||||||||||||||
| March 2008 | 30 | 50 | 20 | 52.2 | |||||||||||||||||
| February 2008 | 26 | 47 | 27 | 50.8 |
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THE LAST 12 MONTHS
| Month | Business Activity Index | Month | Business Activity Index | |||||||||||||||||||||||||
| 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 | |||||||||||||||||||||||||
| Dec 2007 | 54.4 | Jun 2007 | 59.7 | |||||||||||||||||||||||||
| Average for 12 months – 53.5High – 59.7Low – 41.9 |
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New Orders
ISM’s Non-Manufacturing New Orders Index grew in May for the third consecutive month. The index increased 3.5 percentage points to 53.6 percent from the 50.1 percent registered in April. Comments from respondents include: “Orders released by customers”; and “New sales people, new customers.”
Industries reporting growth of new orders in May are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Educational Services; Information; Public Administration; Construction; Utilities; Health Care & Social Assistance; Other Services(c); Wholesale Trade; and Professional, Scientific & Technical Services. The industries reporting contraction of new orders in May are: Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Management of Companies & Support Services; and Retail Trade.
| New Orders | %Higher | %Same | %Lower | Index | ||||||||||||||||||||
| May 2008 | 29 | 56 | 15 | 53.6 | ||||||||||||||||||||
| April 2008 | 26 | 57 | 17 | 50.1 | ||||||||||||||||||||
| March 2008 | 25 | 52 | 23 | 50.2 | ||||||||||||||||||||
| February 2008 | 24 | 50 | 26 | 49.6 |
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Employment
Employment activity in the non-manufacturing sector contracted in May after one month of growth in the last five months. ISM’s Non-Manufacturing Employment Index for May registered 48.7 percent. This reflects a decrease of 2.1 percentage points when compared to the 50.8 percent registered in April. Eight industries reported increased employment, seven industries reported a decrease, and three industries indicated employment is unchanged from April. Comments from respondents include: “Hiring freeze and incentives to retire”; “Permanent positions reduced”; and “Planned – variable staff.”
The industries reporting growth in employment in May are: Arts, Entertainment & Recreation; Mining; Agriculture, Forestry, Fishing & Hunting; Construction; Real Estate, Rental & Leasing; Accommodation & Food Services; Public Administration; and Information. The industries reporting a reduction in employment in May are: Health Care & Social Assistance; Management of Companies & Support Services; Transportation & Warehousing; Educational Services; Retail Trade; Professional, Scientific & Technical Services; and Wholesale Trade.
| Employment | %Higher | %Same | %Lower | Index | |||||||||||||||||
| May 2008 | 18 | 68 | 14 | 48.7 | |||||||||||||||||
| April 2008 | 22 | 61 | 17 | 50.8 | |||||||||||||||||
| March 2008 | 14 | 66 | 20 | 46.9 | |||||||||||||||||
| February 2008 | 14 | 63 | 23 | 46.9 |
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Supplier Deliveries
Supplier deliveries were slower in May with the index registering 51 percent. A reading above 50 percent indicates slower deliveries.
The industries reporting slowing in supplier deliveries in May are: Construction; Educational Services; Utilities; Information; Retail Trade; Professional, Scientific & Technical Services; and Wholesale Trade. The industries reporting faster supplier deliveries in May are: Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Finance & Insurance; and Transportation & Warehousing.
| Supplier Deliveries | %Slower | %Same | %Faster | Index | |||||||||||||||||
| May 2008 | 10 | 82 | 8 | 51.0 | |||||||||||||||||
| April 2008 | 17 | 78 | 5 | 56.0 | |||||||||||||||||
| March 2008 | 7 | 84 | 9 | 49.0 | |||||||||||||||||
| February 2008 | 7 | 86 | 7 | 50.0 |
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Inventories
ISM’s Non-Manufacturing Inventories Index registered 54 percent in May, indicating that inventory levels grew in May after contracting in April. Of the total respondents in May, 32 percent indicated they do not have inventories or do not measure them. Comments from members include: “Planned inventory build up” and “Heavy demand pull.”
The industries reporting increases in inventories in May are: Construction; Arts, Entertainment & Recreation; Other Services(c); Transportation & Warehousing; Information; Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Utilities; Mining; Public Administration; and Health Care & Social Assistance. The industries reporting decreases in inventories in May are: Educational Services; Accommodation & Food Services; Retail Trade; Finance & Insurance; and Wholesale Trade.
| Inventories | %Higher | %Same | %Lower | Index | |||||||||||||||||
| May 2008 | 28 | 52 | 20 | 54.0 | |||||||||||||||||
| April 2008 | 17 | 60 | 23 | 47.0 | |||||||||||||||||
| March 2008 | 22 | 59 | 19 | 51.5 | |||||||||||||||||
| February 2008 | 24 | 52 | 24 | 50.0 |
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Prices
Prices paid by non-manufacturing organizations for purchased materials and services increased in May for the 60th consecutive month. ISM’s Non-Manufacturing Prices Index for May registered 77 percent, 4.9 percentage points higher than April’s index of 72.1 percent. In May, the percentage of respondents reporting higher prices is 65 percent, the percentage indicating no change in prices paid is 34 percent, and 1 percent of the respondents reported lower prices.
In May, all 18 industries reported an increase in prices paid in the following order: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Finance & Insurance; Educational Services; Professional, Scientific & Technical Services; Utilities; Management of Companies & Support Services; Construction; Accommodation & Food Services; Mining; Arts, Entertainment & Recreation; Public Administration; Retail Trade; Health Care & Social Assistance; Wholesale Trade; Other Services(c); Transportation & Warehousing; and Information.
| Prices | %Higher | %Same | %Lower | Index | |||||||||||||||||
| May 2008 | 65 | 34 | 1 | 77.0 | |||||||||||||||||
| April 2008 | 60 | 38 | 2 | 72.1 | |||||||||||||||||
| March 2008 | 53 | 45 | 2 | 70.8 | |||||||||||||||||
| February 2008 | 41 | 54 | 5 | 67.9 |
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Backlog of Orders
ISM’s Non-Manufacturing Backlog of Orders Index contracted in May. The index registered 49 percent, 1 percentage point lower than the 50 percent reported in April. Of the total respondents in May, 45 percent indicated they do not measure backlog of orders.
The industries reporting an increase in order backlogs in May are: Construction; Utilities; Accommodation & Food Services; and Retail Trade. The industries reporting lower backlog of orders in May are: Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Health Care & Social Assistance; Finance & Insurance; Wholesale Trade; Public Administration; and Information.
| Backlog of Orders | %Higher | %Same | %Lower | Index | ||||||||||||||||
| May 2008 | 16 | 66 | 18 | 49.0 | ||||||||||||||||
| April 2008 | 15 | 70 | 15 | 50.0 | ||||||||||||||||
| March 2008 | 14 | 67 | 19 | 47.5 | ||||||||||||||||
| February 2008 | 23 | 53 | 24 | 49.5 |
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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 May. The New Export Orders Index for May registered 54 percent, compared to April’s index of 48.5 percent. Of the total respondents in May, 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 May are: Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Wholesale Trade; and Retail Trade. The industries reporting a decrease in export orders in May are: Management of Companies & Support Services; and Accommodation & Food Services.
| New Export Orders | %Higher | %Same | %Lower | Index | |||||||||||||||||
| May 2008 | 23 | 62 | 15 | 54.0 | |||||||||||||||||
| April 2008 | 18 | 61 | 21 | 48.5 | |||||||||||||||||
| March 2008 | 26 | 58 | 16 | 55.0 | |||||||||||||||||
| February 2008 | 16 | 61 | 23 | 46.5 |
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Imports
The ISM Non-Manufacturing Imports Index registered 48 percent in May. The index is 2 percentage points lower than April’s index of 50 percent. In May, 63 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 May are: Finance & Insurance; Arts, Entertainment & Recreation; and Other Services(c). The industries reporting a decrease in imports for the month of May are: Information; Public Administration; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Retail Trade; and Wholesale Trade.
| Imports | %Higher | %Same | %Lower | Index | |||||||||||||||||
| May 2008 | 15 | 66 | 19 | 48.0 | |||||||||||||||||
| April 2008 | 16 | 68 | 16 | 50.0 | |||||||||||||||||
| March 2008 | 20 | 69 | 11 | 54.5 | |||||||||||||||||
| February 2008 | 18 | 62 | 20 | 49.0 |
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Inventory Sentiment
The ISM Non-Manufacturing Inventory Sentiment Index increased 3.5 percentage points to 66.5 percent in May, indicating that respondents believe their inventories are too high at this time. In May, 35 percent of respondents said their inventories were too high, 2 percent said their inventories were too low, and 63 percent said their inventories were about right.
The industries reporting a feeling that their inventories are too high in May are: Management of Companies & Support Services; Information; Wholesale Trade; Transportation & Warehousing; Construction; Retail Trade; Finance & Insurance; Other Services(c); and Health Care & Social Assistance. The one industry reporting that their inventories are too low is Public Administration.
| Inventory Sentiment | %Too High | %About Right | %Too Low | Index | |||||||||||||||||
| May 2008 | 35 | 63 | 2 | 66.5 | |||||||||||||||||
| April 2008 | 28 | 70 | 2 | 63.0 | |||||||||||||||||
| March 2008 | 24 | 73 | 3 | 60.5 | |||||||||||||||||
| February 2008 | 29 | 63 | 8 | 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 June 2008 data will be released at 10:00 a.m. (ET) on Thursday, July 3, 2008.