Thursday, November 3, 2011

USA Services Sector Growth Slows (Chart) "Concern about future business conditions"

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


Statement by the Institute for Supply Management (Tempe, Arizona) Economic activity in the non-manufacturing sector grew in October for the 23rd 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 52.9 percent in October, 0.1 percentage point lower than the 53 percent registered in September, and indicating continued growth at a slightly slower rate in the non-manufacturing sector. Respondents' comments are mixed and reflect concern about future business conditions.""

Trend The NMI has decreased 6 of the past 8 months. The short-term trend has reversed to upward, the intermediate-term trend is now level, and the long-term trend continues descending.

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), including the Post-Great Recession cyclical high of 59.4% in February 2011, through the latest month reported.


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

Commentary The USA services sector expanded for the 23rd consecutive month in October 2011, since December 2009, but the growth rate decreased. The NMI decreased slightly -0.1 in October to 52.9% yet is showing some resilience with business and consumer confidence at historic lows. Key points of the current report (Direction, Rate of Change):
● Non-Manufacturing Index (NMI) growing, slower
● Business Activity/Production growingslower
● New Orders, Employment growing, slower
● Employment growing, from contracting
● Supplier Deliveries slowing, from faster
● Inventories contracting, from growing
● Prices increasing, slower
● Backlog of Orders contracting, from growing
● New Export Orders growing, faster
● Imports contracting, slower
● Inventory Sentiment too high, slower

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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