Sunday, June 5, 2011

USA Services Sector: Growth Continues in May (Chart) *Non-Manufacturing Index expands for 18th 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 May for the 18th 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 54.6 percent in May, 1.8 percentage points higher than the 52.8 percent registered in April, and indicating continued growth at a faster rate in the non-manufacturing sector. Respondents' comments are mostly positive about overall business conditions. There is a sentiment that there is a degree of stability in the economy; however, a continued concern exists over fuel costs and various volatile commodities."

Trend The short-term trend has reversed to upwards, after 2 monthly decreases. The intermediate-term trend (6 months) continues downwards. The long-term trend (12 months) is level.

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

Commentary The USA services sector expanded for the 18th consecutive month in May 2011 and the rate increased, after 2 monthly declines in growth. The NMI increased +1.8 in May, after plunging -4.5 in April and decreasing -2.4 in March. The related USA manufacturing sector Purchasing Managers' Index (PMI) plunged in May and is reviewed here [USA Manufacturing PMI Plunges to 20-Month Low].


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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