Wednesday, August 3, 2011

USA Services Sector: Growth Continues Slowing (Chart) "Business conditions are flattening out"

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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 July for the 20th 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 52.7 percent in July, 0.6 percentage point lower than the 53.3 percent registered in June, and indicating continued growth at a slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 2.7 percentage points to 56.1 percent, reflecting growth for the 24th consecutive month and at a faster rate than in June. The New Orders Index decreased by 1.9 percentage points to 51.7 percent. The Employment Index decreased 1.6 percentage points to 52.5 percent, indicating growth in employment for the 11th consecutive month, but at a slower rate than in June. The Prices Index decreased 4.3 percentage points to 56.6 percent, indicating that prices increased at a slower rate in July when compared to June. According to the NMI, 13 non-manufacturing industries reported growth in July. Respondents' comments remain mixed; however, for the most part they indicate that business conditions are flattening out."

Trend The short-term trend (3-month moving average) continues downwards for the 4th consecutive month. The NMI has decreased 4 of the past 5 months. The intermediate-term trend (6-month moving average) continues downwards for the 4th consecutive month. The long-term trend (12-month moving average) 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 37.6% 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 January 2010 through the latest month reported.


Industry Performance (Based on the NMI)The 13 non-manufacturing industries reporting growth in July based on the NMI composite index — listed in order — are: Transportation & Warehousing; Mining; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Public Administration; Educational Services; Information; Finance & Insurance; Other Services; and Wholesale Trade. The five industries reporting contraction in July are: Professional, Scientific & Technical Services; Management of Companies & Support Services; Health Care & Social Assistance; Utilities; and Construction

Commentary The USA services sector expanded for the 20th consecutive month in July 2011, since December 2009, but the growth rate decreased. The NMI decreased -1.6 in July to 52.7%, the lowest growth rate since February 2010 (also 52.7%). Key points of the current report (Direction, Rate of Change):
● Non-Manufacturing Index (NMI), USA Manufacturing Sector, growing, slower
● Business Activity/Production, Inventories growing, faster
● New Orders, Employment growing, slower
● Supplier Deliveries slowing, slower
● Prices increasing, slower
● Backlog of Orders contracting, faster
● New Export Orders contracting, from growing
● Imports contracting, slower
● Inventory Sentiment too high, faster


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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