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Economy in Brief

U.S. ISM Nonmanufacturing Index Unexpectedly Jumps to Seven-Month High
by Tom Moeller  July 6, 2016

The Composite Index of Nonmanufacturing Sector Business Activity from the Institute for Supply Management (ISM) strengthened to 56.5 during June versus an unrevised 52.9 in May. It was the highest level since November. Consensus expectations had been for a decline to 53.5 in the Action Economics Forecast Survey. The ISM data are diffusion indexes where readings above 50 indicate expansion.

Haver Analytics constructs a Composite Index using the nonmanufacturing ISM index and the ISM factory sector measure released Friday. It surged to 56.1, the highest level since October. 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 there was broad-based strength last month. The business activity reading rebounded to 59.5, the highest in six months, while new orders recovered their May drop. The supplier delivery series jumped to 54.0 and indicated the slowest product delivery speeds since March of last year. The employment index recovered most of May's decline and moved above break-even to 52.7. 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 prices paid series remained fairly stable at 55.5, near the highest level since September 2014. Twenty percent (NSA) of respondents paid higher prices while five percent paid less.

The export order series rebounded to 53.0, but remained well below last July's high. The imports price series was stable at 54.0. The order backlog figure dropped sharply to 47.5, the lowest level since December 2013. Each of these last few readings is not seasonally adjusted

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

ISM Nonmanufacturing Survey (SA) Jun May Apr Jun'15 2015 2014 2013
Composite Diffusion Index 56.5 52.9 55.7 56.2 57.1 56.2 54.6
   Business Activity 59.5 55.1 58.8 61.5 60.8 59.7 56.6
   New Orders 59.9 54.2 59.9 58.7 59.2 58.6 55.8
   Employment 52.7 49.7 53.0 53.1 56.1 54.9 54.3
   Supplier Deliveries (NSA) 54.0 52.5 51.0 51.5 52.5 51.8 51.7
Prices Index 55.5 55.6 53.4 52.3 50.7 56.8 55.7
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