Global| Jun 04 2014U.S. ISM Nonmanufacturing Index Works Higher
by:Tom Moeller
|in:Economy in Brief
Summary
The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) improved to 56.3 in May, its highest level in nine months. The latest figure beat expectations for 55.5 in the Action [...]
The Composite Index for the service and construction sectors from the Institute for Supply Management (ISM) improved to 56.3 in May, its highest level in nine months. The latest figure beat expectations for 55.5 in the Action Economics Forecast Survey. During the last ten years, there has been a 75% correlation between the level of the nonmanufacturing composite index and the q/q change in real GDP for the service and the construction sectors.
Haver Analytics calculates an index using the ISM nonmanufacturing series and the ISM manufacturing sector index released Monday. The May figure increased to 56.2, also a nine month high. During the last ten years, there has been a 76% correlation between this composite index and the quarterly change in real GDP.
Leading the nonmanufacturing index higher last month was a jump in the new orders figure to 60, its highest point since January 2011. The business activity index also rose moderately to 62.1 and nonmanufacturing payrolls improved to 52.4. During the last ten years, there has been an 89% correlation between the employment index and the m/m change in private service sector plus construction payrolls. The supplier delivery index slipped to 50.0, indicating the quickest delivery speeds since October.
The prices paid index gained to 61.4, its highest level since October 2012. Twenty-seven percent of respondents indicated paying higher prices last month while five percent reported them lower. During the last ten years, there has been a 78% correlation between the price index and the q/q change in the GDP services chain price index.
Beginning with the January 2008 Nonmanufacturing Report On Business, the composite index is calculated as an indication of overall economic conditions for the nonmanufacturing sector. It is a composite index based on the diffusion indices of four of the indicators (business activity, new orders, employment and supplier deliveries), each with equal weights. Readings above 50 indicate expansion in activity.
The ISM data are available in Haver's USECON database. The expectations figure from Action Economics is in the AS1REPNA database.
The Fed's latest Beige Book covering regional economic conditions is available here.
| ISM Nonmanufacturing Survey (SA) | May | Apr | Mar | May'13 | 2013 | 2012 | 2011 |
|---|---|---|---|---|---|---|---|
| Composite Diffusion Index | 56.3 | 55.2 | 53.1 | 54.0 | 54.7 | 54.6 | 54.4 |
| Business Activity | 62.1 | 60.9 | 53.4 | 57.0 | 56.7 | 57.7 | 57.2 |
| New Orders | 60.5 | 58.2 | 53.4 | 56.6 | 55.9 | 56.6 | 56.3 |
| Employment | 52.4 | 51.3 | 53.6 | 50.3 | 54.4 | 53.5 | 52.4 |
| Supplier Deliveries (NSA) | 50.0 | 50.5 | 52.0 | 52.0 | 51.7 | 50.6 | 51.9 |
| Prices Index | 61.4 | 60.8 | 58.3 | 54.4 | 55.6 | 59.3 | 65.1 |
Tom Moeller
AuthorMore in Author Profile »Prior to joining Haver Analytics in 2000, Mr. Moeller worked as the Economist at Chancellor Capital Management from 1985 to 1999. There, he developed comprehensive economic forecasts and interpreted economic data for equity and fixed income portfolio managers. Also at Chancellor, Mr. Moeller worked as an equity analyst and was responsible for researching and rating companies in the economically sensitive automobile and housing industries for investment in Chancellor’s equity portfolio. Prior to joining Chancellor, Mr. Moeller was an Economist at Citibank from 1979 to 1984. He also analyzed pricing behavior in the metals industry for the Council on Wage and Price Stability in Washington, D.C. In 1999, Mr. Moeller received the award for most accurate forecast from the Forecasters' Club of New York. From 1990 to 1992 he was President of the New York Association for Business Economists. Mr. Moeller earned an M.B.A. in Finance from Fordham University, where he graduated in 1987. He holds a Bachelor of Arts in Economics from George Washington University.
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