Tuesday, April 5, 2011

USA Services Sector: Continuing Growth at Slower Rate in March (Chart) *Non-Manufacturing Index expands for 16th month*


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

Official Statement by the Institute for Supply Management (Tempe, Arizona) - Economic activity in the non-manufacturing sector grew in March for the 16th 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 registered 57.3 percent in March, 2.4 percentage points lower than the 59.7 percent registered in February, and indicating continued growth at a slower rate in the non-manufacturing sector.
● The Non-Manufacturing Business Activity Index decreased 7.2 percentage points to 59.7 percent, reflecting growth for the 20th consecutive month, but at a slower rate than in February.
● The New Orders Index decreased 0.3 percentage point to 64.1 percent, and the Employment Index decreased 1.9 percentage points to 53.7 percent, indicating growth in employment for the seventh consecutive month, but at a slower rate.
● The Prices Index decreased 1.2 percentage points to 72.1 percent, indicating that prices increased at a slightly slower rate in March.
● According to the NMI, 16 non-manufacturing industries reported growth in March. Respondents' comments reflect concern about the recent natural disasters in Japan and the associated supply chain ramifications. Additionally, there is concern over rising costs, most notably for fuel and fuel products. Overall, most respondents remain confident about the direction of the economy."

Trend The short term uptrend has now stopped and pulled back, after 6 consecutive monthly increases. The intermediate and long term trends continue upwards. The current ISM Non-Manufacturing Index is above the ascending 12-month moving average of 55.6. (The 12-month moving average chart is not shown on this page).

Cycle History The ISM Non-Manufacturing Index reached a Post-Great Recession cyclical high of 59.7 in February 2011. A Great Recession cyclical low of 37.2 was set in November 2008. The NMI is a percentage - not a total. More about the NMI below the chart.

Non-Manufacturing Index (Chart) Below is a chart of the Non-Manufacturing Index (NMI) of the Institute for Supply Management (ISM) from August 2009 through the latest month reported.

Industry Performance (Based on the NMI) The 16 industries reporting growth in March based on the NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Mining; Management of Companies & Support Services; Retail Trade; Arts, Entertainment & Recreation; Wholesale Trade; Accommodation & Food Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; Information; Finance & Insurance; Agriculture, Forestry, Fishing & Hunting; Utilities; Construction; Transportation & Warehousing; and Public Administration. The only industry reporting contraction in March is Educational Services.

Commentary The USA services sector expanded for the 16th consecutive month, but at a slower rate in March. This slowing of expansion was also indicated by the related  ISM Manufacturing PMI for the USA and is reviewed here [USA Manufacturing PMI: Rapid Growth Continues (Chart) March: Economy expands for 22nd month*].

About The NMI

Level of the NMI 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.

NMI Components 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).

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

About the Institute for Supply Management 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.

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