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Economy in Brief

U.S. ISM Nonmanufacturing Index Declines Unexpectedly; Prices Firm
by Tom Moeller  June 3, 2016

The Composite Index of Nonmanufacturing Sector Business Activity from the Institute for Supply Management (ISM) declined to 52.9 during May versus an unrevised 55.7 in April. It was the lowest level since February 2014. Consensus expectations had been for a rise to 55.3 in the Action Economics Forecast Survey. The ISM data are diffusion indexes where readings above 50 indicates expansion.

Haver Analytics constructs a Composite Index using the nonmanufacturing ISM index and the ISM factory sector measure released Wednesday. It fell to 52.7, the lowest level since August 2012. During the last ten years, there has been a 72% correlation between the index and the q/q change in real GDP.

Amongst the component series, the business activity reading fell to 55.1, the lowest reading since January. New orders dropped sharply to 54.2. The employment index fell below break-even to 49.7 following two months above 50. During the last ten years, there has been a 96% correlation between the employment index and the m/m change in service plus construction payrolls. The supplier delivery index increased to 52.5.

The prices paid series increased to 55.6, the highest level since September 2014. Twenty four percent (NSA) of respondents paid higher prices while 7 percent paid less.

The export order series (NSA) fell to 49.0 and the imports series eased to 53.5. The order backlog figure fell to 50.0 and remained down versus a high of 56.5 last August.

The figures are available in Haver's USECON database. The expectations figure from Action Economics is in the AS1REPNA database.

ISM Nonmanufacturing Survey (SA) May Apr Mar May'15 2015 2014 2013
Composite Diffusion Index 52.9 55.7 54.5 55.9 57.1 56.2 54.6
   Business Activity 55.1 58.8 59.8 59.9 60.8 59.7 56.6
   New Orders 54.2 59.9 56.7 58.0 59.2 58.6 55.8
   Employment 49.7 53.0 50.3 55.8 56.1 54.9 54.3
   Supplier Deliveries (NSA) 52.5 51.0 51.0 50.0 52.5 51.8 51.7
Prices Index 55.6 53.4 49.1 54.0 50.7 56.8 55.7
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