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AMR Research: Spend Visibility

FOR RELEASE: March 3, 2010


Contact: Rose Marie Goupil
ISM, ROB Media Relations
Tempe, Arizona
800/888-6276, Ext. 3015
E-mail: rgoupil@ism.ws


February 2010 Non-Manufacturing ISM Report On Business®

NMI (Non-Manufacturing Index) at 53%

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire United States, while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of February 2010.


Business Activity Index at 54.8%
New Orders Index at 55%
Employment Index at 48.6%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in February for the second 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; and senior vice president — supply management for Hilton Worldwide. "The NMI (Non-Manufacturing Index) registered 53 percent in February, 2.5 percentage points higher than the seasonally adjusted 50.5 percent registered in January, indicating growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 2.6 percentage points to 54.8 percent, reflecting growth for the third consecutive month. The New Orders Index increased 0.3 percentage point to 55 percent, and the Employment Index increased 4 percentage points to 48.6 percent. The Prices Index decreased 0.8 percentage point to 60.4 percent in February, indicating an increase in prices paid from January. According to the NMI, nine non-manufacturing industries reported growth in February. Respondents' comments vary by industry and company about business conditions."

INDUSTRY PERFORMANCE (Based on the NMI)

The nine industries reporting growth in February based on the NMI composite index — listed in order — are: Information; Arts, Entertainment & Recreation; Transportation & Warehousing; Public Administration; Professional, Scientific & Technical Services; Other Services; Retail Trade; Wholesale Trade; and Finance & Insurance. The eight industries reporting contraction in February — listed in order — are: Educational Services; Health Care & Social Assistance; Management of Companies & Support Services; Construction; Utilities; Accommodation & Food Services; Real Estate, Rental & Leasing; and Mining.

WHAT RESPONDENTS ARE SAYING ...
  • "Conditions for our business have substantially improved over the last three months." (Information)
  • "We are proceeding with caution based upon the current market conditions." (Public Administration)
  • "Business activity about the same as last month. Perhaps a slight increase in new orders for material and services — nothing major." (Utilities)
  • "The overall unemployment and the net effect of housing [instability] continue to affect our business." (Retail Trade)
  • "Business is okay. Customers are doing a lot of price shopping." (Agriculture, Forestry, Fishing & Hunting)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
FEBRUARY 2010
  Non-Manufacturing Manufacturing
Index Series
Index
Feb.		 Series
Index
Jan.		 Percent
Point
Change		 Direction Rate
of
Change		 Trend**
(Months)		 Series
Index
Feb.		 Series
Index
Jan.		 Percent
Point
Change
NMI/PMI 53.0 50.5 +2.5 Growing Faster 2 56.5 58.4 -1.9
Business Activity/Production 54.8 52.2 +2.6 Growing Faster 3 58.4 66.2 -7.8
New Orders 55.0 54.7 +0.3 Growing Faster 6 59.5 65.9 -6.4
Employment 48.6 44.6 +4.0 Contracting Slower 26 56.1 53.3 +2.8
Supplier Deliveries 53.5 50.5 +3.0 Slowing Faster 3 61.1 60.1 +1.0
Inventories 45.0 46.5 -1.5 Contracting Faster 2 47.3 46.5 +0.8
Prices 60.4 61.2 -0.8 Increasing Slower 7 67.0 70.0 -3.0
Backlog of Orders 46.0 45.5 +0.5 Contracting Slower 4 61.0 56.0 +5.0
New Export Orders 47.0 46.0 +1.0 Contracting Slower 3 56.5 58.5 -2.0
Imports 48.5 47.0 +1.5 Contracting Slower 2 56.0 56.5 -0.5
Inventory Sentiment 60.0 64.5 -4.5 Too High Slower 153 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 37.0 32.0 +5.0

* Non-Manufacturing ISM Report On Business® data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. Manufacturing ISM Report On Business® data is seasonally adjusted for New Orders, Production, Employment, Supplier Deliveries and Inventories.

** Number of months moving in current direction


COMMODITIES REPORTED UP / DOWN IN PRICE, and IN SHORT SUPPLY

Commodities Up in Price

Airfare (2); Fuel* (2); Gasoline (4); Paper; Pharmaceuticals (2); Pharmacy Supplies (2); and Steel Products.

Commodities Down in Price

Beef; and Fuel*.

Commodities in Short Supply

No commodities are reported in short supply.

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.


FEBRUARY 2010 NON-MANUFACTURING INDEX SUMMARIES

NMI (Non-Manufacturing Index)

In February, the NMI registered 53 percent, indicating growth in the non-manufacturing sector for the second consecutive month. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.

NMI HISTORY
Month NMI Month NMI
Feb 2010 53.0 Aug 2009 48.2
Jan 2010 50.5 Jul 2009 46.7
Dec 2009 49.8 Jun 2009 46.3
Nov 2009 48.4 May 2009 44.5
Oct 2009 50.1 Apr 2009 43.9
Sep 2009 50.1 Mar 2009 41.2
Average for 12 months — 47.7
High — 53.0
Low — 41.2

Business Activity

ISM's Non-Manufacturing Business Activity Index in February registered 54.8 percent, an increase of 2.6 percentage points when compared to the seasonally adjusted 52.2 percent registered in January. Four industries reported increased business activity, and 10 industries reported decreased activity for the month of February. Four industries reported no change from January. Comments from respondents include: "New projects for the year" and "More quoting and shipping."

The industries reporting growth of business activity in February are: Information; Finance & Insurance; Public Administration; and Professional, Scientific & Technical Services. The industries reporting decreased business activity in February — listed in order — are: Other Services; Management of Companies & Support Services; Construction; Educational Services; Wholesale Trade; Health Care & Social Assistance; Real Estate, Rental & Leasing; Transportation & Warehousing; Retail Trade; and Mining.


Business Activity		 %
Higher		 %
Same		 %
Lower
Index
Feb 2010 23 57 20 54.8
Jan 2010 26 44 30 52.2
Dec 2009 26 50 24 53.2
Nov 2009 23 52 25 49.6

New Orders

ISM's Non-Manufacturing New Orders Index grew in February for the sixth consecutive month. The index registered 55 percent, which is an increase of 0.3 percentage point from the seasonally adjusted 54.7 percent reported in January. Comments from respondents include: "New customer program ramp up"; "Seeing an increase in business — our customers are feeling more optimistic"; and "Expansion by existing customers and new customers."

The seven industries reporting growth of new orders in February — listed in order — are: Information; Other Services; Public Administration; Professional, Scientific & Technical Services; Transportation & Warehousing; Accommodation & Food Services; and Wholesale Trade. The eight industries reporting contraction of new orders in February — listed in order — are: Health Care & Social Assistance; Management of Companies & Support Services; Construction; Educational Services; Finance & Insurance; Real Estate, Rental & Leasing; Retail Trade; and Mining.


New Orders		 %
Higher		 %
Same		 %
Lower
Index
Feb 2010 23 59 18 55.0
Jan 2010 26 49 25 54.7
Dec 2009 22 55 23 52.0
Nov 2009 26 56 18 53.7

Employment

Employment activity in the non-manufacturing sector contracted in February for the 26th consecutive month. ISM's Non-Manufacturing Employment Index for February registered 48.6 percent. This reflects an increase of 4 percentage points when compared to the seasonally adjusted 44.6 percent registered in January. Two industries reported increased employment, nine industries reported decreased employment, and seven industries reported unchanged employment compared to January. Comments from respondents include: "Some focused workforce reductions have taken place" and "Due to state budget issues, position vacancies are not being filled unless absolutely necessary."

The industries reporting an increase in employment in February are: Retail Trade; and Transportation & Warehousing. The industries reporting a reduction in employment in February — listed in order — are: Educational Services; Real Estate, Rental & Leasing; Mining; Accommodation & Food Services; Utilities; Health Care & Social Assistance; Information; Public Administration; and Wholesale Trade.


Employment		 %
Higher		 %
Same		 %
Lower
Index
Feb 2010 12 68 20 48.6
Jan 2010 10 62 28 44.6
Dec 2009 9 70 21 43.6
Nov 2009 11 61 28 41.7

Supplier Deliveries

The Supplier Deliveries Index registered 53.5 percent in February, indicating supplier deliveries were slowing in February at a faster rate when compared to January. A reading above 50 percent indicates slower deliveries.

The seven industries reporting slower deliveries in February — listed in order — are: Arts, Entertainment & Recreation; Mining; Real Estate, Rental & Leasing; Other Services; Wholesale Trade; Transportation & Warehousing; and Accommodation & Food Services. The two industries reporting faster supplier deliveries in February are: Utilities and Retail Trade.


Supplier Deliveries		 %
Slower		 %
Same		 %
Faster
Index
Feb 2010 12 83 5 53.5
Jan 2010 9 83 8 50.5
Dec 2009 8 85 7 50.5
Nov 2009 6 85 9 48.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 45 percent in February, indicating that inventory levels contracted in February for the second consecutive month. Of the total respondents in February, 28 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Have reduced inventory levels since the holidays" and "Still burning inventory and the momentum is hard to stop."

The four industries reporting an increase in inventories in February are: Utilities; Information; Health Care & Social Assistance; and Wholesale Trade. The eight industries reporting decreases in inventories in February — listed in order — are: Accommodation & Food Services; Transportation & Warehousing; Professional, Scientific & Technical Services; Mining; Public Administration; Retail Trade; Management of Companies & Support Services; and Real Estate, Rental & Leasing.


Inventories		 %
Higher		 %
Same		 %
Lower
Index
Feb 2010 14 62 24 45.0
Jan 2010 16 61 23 46.5
Dec 2009 21 61 18 51.5
Nov 2009 19 53 28 45.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in February. ISM's Non-Manufacturing Prices Index for February registered 60.4 percent, 0.8 percentage point lower than the seasonally adjusted 61.2 percent reported in January. In February, the percentage of respondents reporting higher prices is 21 percent, the percentage indicating no change in prices paid is 73 percent, and 6 percent of the respondents reported lower prices.

In February, nine industries reported an increase in prices paid, in the following order: Mining; Arts, Entertainment & Recreation; Wholesale Trade; Professional, Scientific & Technical Services; Utilities; Retail Trade; Finance & Insurance; Public Administration; and Health Care & Social Assistance. The two industries reporting prices as decreasing for the month of February are: Accommodation & Food Services; and Real Estate, Rental & Leasing.


Prices		 %
Higher		 %
Same		 %
Lower
Index
Feb 2010 21 73 6 60.4
Jan 2010 27 64 9 61.2
Dec 2009 19 73 8 59.6
Nov 2009 21 69 10 57.1

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in February for the fourth consecutive month. The index registered 46 percent, 0.5 percentage point higher than the 45.5 percent reported in January. Of the total respondents in February, 50 percent indicated they do not measure backlog of orders.

The four industries reporting an increase in order backlogs in February are: Construction; Transportation & Warehousing; Accommodation & Food Services; and Professional, Scientific & Technical Services. The six industries reporting lower backlog of orders in February — listed in order — are: Educational Services; Other Services; Management of Companies & Support Services; Retail Trade; Utilities; and Mining.


Backlog of Orders		 %
Higher		 %
Same		 %
Lower
Index
Feb 2010 10 72 18 46.0
Jan 2010 13 65 22 45.5
Dec 2009 13 70 17 48.0
Nov 2009 16 65 19 48.5

New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically based personnel contracted in February for the third consecutive month. The New Export Orders Index for February registered 47 percent, which is 1 percentage point higher than the 46 percent registered in January. Of the total respondents in February, 72 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The three industries reporting an increase in new export orders in February are: Real Estate, Rental & Leasing; Information; and Mining. The four industries reporting a decrease in export orders in February are: Other Services; Educational Services; Wholesale Trade; and Retail Trade.


New Export Orders		 %
Higher		 %
Same		 %
Lower
Index
Feb 2010 15 64 21 47.0
Jan 2010 15 62 23 46.0
Dec 2009 13 66 21 46.0
Nov 2009 19 71 10 54.5

Imports

The ISM Non-Manufacturing Imports Index registered 48.5 percent, indicating contraction for the month of February. In the month of February, 63 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The three industries reporting an increase in the use of imports in February are: Other Services; Information; and Retail Trade. The three industries reporting a decrease in imports for the month of February are: Educational Services; Arts, Entertainment & Recreation; and Mining.


Imports		 %
Higher		 %
Same		 %
Lower
Index
Feb 2010 11 75 14 48.5
Jan 2010 11 72 17 47.0
Dec 2009 17 71 12 52.5
Nov 2009 5 82 13 46.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in February registered 60 percent. This is 4.5 percentage points lower than the 64.5 percent reported in January, indicating that respondents still believe their inventories are too high at this time. In February, 26 percent of respondents said their inventories were too high, 6 percent said their inventories were too low, and 68 percent said their inventories were about right.

The 10 industries reporting a feeling that their inventories are too high in February — listed in order — are: Mining; Other Services; Management of Companies & Support Services; Health Care & Social Assistance; Wholesale Trade; Construction; Information; Professional, Scientific & Technical Services; Accommodation & Food Services; and Retail Trade. The only industry reporting that its inventory is too low in February is Transportation & Warehousing.


Inventory Sentiment		 %Too
High		 %About
Right		 %Too
Low
Index
Feb 2010 26 68 6 60.0
Jan 2010 33 63 4 64.5
Dec 2009 23 76 1 61.0
Nov 2009 30 63 7 61.5

About this Report

The data presented herein is obtained from a survey of non-manufacturing supply managers based on information they have collected within their respective organizations. ISM makes no representation, other than that stated within this release, regarding the individual company data collection procedures. Use of the data is in the public domain and should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation

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).

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment and Supplier Deliveries), this report shows the percentage reporting each response, and the diffusion index. Responses represent raw data and are never changed. Data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The remaining indexes have not indicated significant seasonality.

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.

The Non-Manufacturing ISM Report On Business® is published monthly by the Institute for Supply Management™, the largest supply management research and education organization in the United States. 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.

The full text version of the Non-Manufacturing ISM Report On Business® is posted on ISM's Web site at www.ism.ws on the third business day of every month after 10:10 a.m. (ET).

The next Non-Manufacturing ISM Report On Business® featuring the March 2010 data will be released at 10:00 a.m. (ET) on Monday, April 5, 2010.


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