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Economy in Brief

U.S. ISM Nonmanufacturing Index Surges
by Tom Moeller  February 5, 2018

The Composite Index of Nonmanufacturing Sector Activity from the Institute for Supply Management (ISM) strengthened to 59.9 during January from 56.0 in December, revised up from the initially reported 55.9. It was the highest level since August 2005. The Action Economics Forecast Survey expected an uptick to 56.6. 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 Thursday. This composite jumped to 59.8 during January, the highest level also since July 2005. During the last ten years, there has been a 73% correlation between this index and the q/q change in real GDP.

Strength in the component series was broad-based, led by a surge in the new orders reading to 62.7. That was followed by a modest increase in the business activity reading to 59.8. The supplier delivery index remained unchanged at 52.5. This was lower than the figure in September which spiked to 58.0 due to hurricane damage, but higher than all other readings during the economic recovery.

The employment measure strengthened to a record 61.6. During the last ten years, there has been an 89% correlation between the ISM nonmanufacturing sector jobs index and the m/m change in private service plus construction sector payrolls. An increased 26% (NSA) of industries reported a rising jobs level while a lessened four percent indicated a decline.

The prices paid index improved to a four-month high of 61.9. A higher 26% (NSA) of firms reported paying higher prices while a lessened four percent of firms reported them lower.

Amongst the other detail indexes, which are not seasonally adjusted, export orders improved m/m to 58.0 and remained below the 65.5 April high. The import index strengthened m/m to 54.0, the highest level since March. The order backlog index remained low at 50.5, nearly the lowest level since January.

The ISM figures are available in Haver's USECON database, with additional detail in the SURVEYS database. The expectations figure from Action Economics is in the AS1REPNA database.

ISM Nonmanufacturing Survey (SA) Jan Dec Nov Jan'17 2017 2016 2015
Composite Diffusion Index 59.9 56.0 57.3 56.8 56.9 54.9 57.1
   Business Activity 59.8 57.8 61.1 60.7 60.1 58.0 60.8
   New Orders 62.7 54.5 58.8 59.3 59.3 57.5 59.2
   Employment 61.6 56.3 55.4 54.5 55.2 52.6 56.0
   Supplier Deliveries (NSA) 55.5 55.5 54.0 52.5 53.2 51.5 52.5
Prices Index 61.9 59.9 60.1 57.5 57.7 52.6 50.6
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