Sunday, December 5, 2010

USA Non-Manufacturing Index (NMI) Up +0.7% in November (Chart) "Sector continued expanding for 11th consecutive month"


USA Non-Manufacturing Index (NMI) by the Institute for Supply Management

USA Non-Manufacturing Index (NMI) Up +0.7% in November

Official Statement by the Institute for Supply Management (Tempe, Arizona) - Economic activity in the non-manufacturing sector grew in November for the 11th 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, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. "The NMI (Non-Manufacturing Index) registered 55 percent in November, 0.7 percentage point higher than the 54.3 percent registered in October, and indicating continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index decreased 1.4 percentage points to 57 percent, reflecting growth for the 12th consecutive month but at a slower rate than in October. The New Orders Index increased 1 percentage point to 57.7 percent, and the Employment Index increased 1.8 percentage points to 52.7 percent, indicating growth in employment for the third consecutive month and the fifth time in the last seven months. The Prices Index decreased 5.1 percentage points to 63.2 percent, indicating that prices increased slower in November. According to the NMI, 10 non-manufacturing industries reported growth in November. Respondents' comments mostly reflect cautious optimism. There is a degree of uncertainty that still remains for some industries and companies."

Industry Performance (Based on the NMI) "The 10 industries reporting growth in November based on the NMI composite index — listed in order — are: Retail Trade; Accommodation & Food Services; Utilities; Other Services; Finance & Insurance; Information; Transportation & Warehousing; Professional, Scientific & Technical Services; Health Care & Social Assistance; and Construction. The six industries reporting contraction in November — listed in order — are: Mining; Agriculture, Forestry, Fishing & Hunting; Educational Services; Management of Companies & Support Services; Public Administration; and Wholesale Trade."

Short-Term Cycle History The current ISM NMI is up +6.8 and +14.1% from the recent low of 48.2 in August 2009. The NMI is now down just -1.4 and -0.7%  from the recent high of 55.4 in March, April, and May 2010. The NMI is a percentage - not a total. More about the NMI below the chart.

Trend The NMI had been trending downwards after the 3-month peak in March, April, and May 2010. Now the NMI has bounced up from the August low  and increased 3 consecutive months. The NMI has been greater than 50, indicating USA non-manufacturing is expanding, since January 2010, for 11 consecutive months. The current NMI of 55.0 is above the 12-month moving average of 53.5. (The 12-month moving average chart is not shown on this page).

Non-Manufacturing Index (Chart) Below is a chart of the latest 16 months of the Non-Manufacturing Index (NMI) of the Institute for Supply Management (ISM) from August 2009 through the latest month reported, November 2010. As can be seen, the NMI was lowest, on this chart, in August 2009, at 48.2, and then ascended significantly to the cyclical peak in March at 55.4. The NMI then stayed at this level through April and May before descending to an August low of 51.5. The NMI has increased in each of the subsequent 3 months.

Commentary This is another month of encouraging data as the trend is now upwards and signals continued expansion in the USA non-manufacturing sector. Also encouraging is the 11 consecutive months of gains and now the rate of increase is increasing for the 3rd consecutive month. The related  ISM Manufacturing PMI dipped in November, but is still expanding, and is reviewed here <USA Manufacturing PMI Dips -0.3% in November (Chart) "Sector continued expanding for 16th consecutive month"*>.

About The NMI

The ISM describes the NMI, the USA non-manufacturing metric:

Level of the NMI A reading above 50 percent indicates that the manufacturing economy is generally expanding; below 50 percent indicates that it is generally contracting. An NMI in excess of 42 percent, over a period of time, generally indicates an expansion of the overall economy

NMI Components The NMI is a composite of five indexes: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. 17 non-manufacturing industries are reported and represented in the NMI index: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Information; Other Services; Transportation & Warehousing; Public Administration; Mining; Health Care & Social Assistance; Educational Services; Wholesale Trade, Construction; Utilities; Accommodation & Food Services; and Finance & Insurance.

Non-Manufacturing Sector Plays a Significant Role in Economy The non-manufacturing sector currently makes up more than 80 percent of the gross domestic product (GDP). In addition to purchasing materials for production, manufacturing businesses also source for services from various non-manufacturing industries. Virtually every business is impacted by business activity in the non-manufacturing sector.

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*Data courtesy of the Institute for Supply Management*

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