Wednesday, May 4, 2011

USA Services Sector: Growth Rate Plunges in April (Chart) *Non-Manufacturing Index expands for 17th month*

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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 April for the 17th 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 52.8 percent in April, 4.5 percentage points lower than the 57.3 percent registered in March, and indicating continued growth at a slower rate in the non-manufacturing sector.
● The Non-Manufacturing Business Activity Index decreased 6 percentage points to 53.7 percent, reflecting growth for the 21st consecutive month, but at a slower rate than in March.
● The New Orders Index decreased substantially by 11.4 percentage points to 52.7 percent. The Employment Index decreased 1.8 percentage points to 51.9 percent, indicating growth in employment for the eighth consecutive month, but at a slower rate.
● The Prices Index decreased 2 percentage points to 70.1 percent, indicating that prices increased at a slightly slower rate in April when compared to March.
● According to the NMI, 17 non-manufacturing industries reported growth in April. Respondents' comments are mixed about overall business conditions; however, they are mostly positive. Respondents' comments also indicate concern over rising fuel costs, commodity costs and the lingering uncertainty about the economy."

Trend The shortterm trend is down and has decreased for 2 months. This was after after 6 consecutive monthly increases. The intermediate and long term trends have reversed and are decreasing. This is the lowest reading since August 2010 (also 52.8).

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

Commentary The USA services sector expanded for the 17th consecutive month, but the rate slowed in March and even more in April. The NMI decreased -2.4 in March and plunged -4.5 in April from the Post-Recession Peak of 59.7 in February 2011 to the current 52.8 in April 2011. This slowing of expansion was not as pronounced by the related  ISM Manufacturing PMI for the USA and is reviewed here [USA Manufacturing PMI: Rapid Growth Continues in April (Chart) March: Economy expands for 23rd 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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*Data courtesy of the Institute for Supply Management*


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