--- To enhance the value and performance of procurement and SCM practitioners and their organizations worldwide ---




January 2006 Non-Manufacturing ISM Report On Business®

FOR RELEASE: February 3, 2006

Contact: Rose Marie Goupil
  ISM, Media Relations
  Tempe, Arizona
  800/888-6276, Ext. 3015
  E-mail: rgoupil@ism.ws
Business Activity at 56.8%

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 January 2006.

This report reflects the U.S. Department of Commerce's recently completed annual adjustment to seasonal factors used to calculate the indexes.


New Orders Index at 56%;
Employment Index at 51.1%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased in January 2006, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Ralph G. Kauffman, Ph.D., C.P.M., chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee and coordinator of the Supply Chain Management Program, University of Houston-Downtown. "Non-manufacturing business activity increased for the 34th consecutive month in January," Kauffman said. He added, "Business Activity and New Orders increased at slower rates in January than in December. Imports, Employment and New Export Orders also increased at slower rates while Prices increased at the same rate as in December. Eight of 16 non-manufacturing industry sectors report increased activity in January compared to 11 that reported increased activity in December. While in almost all indexes growth declined in January, they are still above the value of "50" indicating that growth continues, but at slower rates of growth. Members' comments in January continue to be generally positive concerning current business conditions. Several members mention concerns about the continued high level of energy prices and rising interest rates. The Prices Index held steady this month, but remains in a historically high range for the ISM Non-Manufacturing Business Survey. The overall indication in January is continued economic growth in the non-manufacturing sector, but at slower rates of increase."

TOP PERFORMING INDUSTRIES

The eight industries reporting growth in January — listed in order — are: Insurance; Business Services; Utilities; Mining; Transportation; Other Services*; Health Services; and Finance & Banking. The three industries reporting activity the same as last month are: Public Administration; Communication; and Entertainment. The five industries reporting decreased activity from December to January are: Agriculture; Wholesale Trade; Real Estate; Retail Trade; and Construction.

WHAT RESPONDENTS ARE SAYING ...
  • "We experienced a season [al] trend slowdown in our level of business activity and in our level of professionals working at a client site." (Business Services)
  • "Interest rate increases taking effect together with higher energy costs beginning to materially impact consumer spending." (Finance & Banking)
  • "A good month overall. Outpatient services and activity continue to perform over budget, but inpatient activity continues to perform under budget." (Health Services)
  • "The oil industry continues to have a profound impact on all commodities either in production or the delivery process. Fluctuations will continue until oil stabilizes." (Public Administration)
  • "Economy — business is good, consumer trading down." (Retail Trade)
  • "Contractor availability for maintenance and construction projects continues to decline due to regional business activity. A high percentage decline opportunities to bid." (Utilities)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
JANUARY 2006
  Non-Manufacturing Manufacturing
Index Series
Index
Jan.
Series
Index
Dec.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Jan.
Series
Index
Dec.
Percent
Point
Change
Business Activity / Production 56.8 61.0 -4.2 Increasing Slower 34 56.6 57.8 -1.2
New Orders 56.0 62.2 -6.2 Increasing Slower 34 58.0 59.1 -1.1
Employment 51.1 56.9 -5.8 Increasing Slower 18 51.3 53.6 -2.3
Supplier Deliveries 54.5 56.5 -2.0 Slowing Slower 53 55.3 52.9 +2.4
Inventories 55.0 56.0 -1.0 Increasing Slower 3 46.5 47.3 -0.8
Prices 67.2 67.2 0 Increasing At same rate 46 65.0 63.0 +2.0
Backlog of Orders 52.5 54.0 -1.5 Increasing Slower 12 53.5 49.5 +4.0
New Export Orders 58.0 61.5 -3.5 Increasing Slower 7 58.5 54.3 +4.2
Imports 49.5 56.5 -7.0 Decreasing From Increasing 1 57.0 52.8 +4.2
Inventory Sentiment 63.0 59.0 +4.0 "Too High" Greater 104 N/A N/A N/A
Customers' Inventories N/A N/A         46.0 48.0 -2.0

* 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 except for Backlog of Orders, Prices, Imports and Customers' Inventories.

** Number of months moving in current direction
Indexes reflect newly released seasonal adjustment factors.


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

Commodities Up in Price

Airfares (10); Aluminum (2); Asphalt/Asphalt Products (3); Batteries — Automotive and Other; Beef* (3); Cement; Concrete (2); Copper (29); Copper Products (various) (3); Corn (2); Corrugated (3); #1 Diesel Fuel (11); #2 Diesel Fuel (13); Electricity (2); Freight Charges (7); Fuel (26); Gasoline* (26); Lumber -Pine, Spruce and Treated; Metals; Natural Gas (8); Office Supplies; Paper (24); Petroleum; Petroleum Goods/Products; Plastics/Plastic Products (7); Plastic Bags (2); Postal Rates; Rental Vehicles; Roofing Materials*; Soybean Meal (2); Steel/Steel Products (2); Tomatoes (2); and Unleaded Gasoline.

Commodities Down in Price

Beef*; Gasoline*; Memory/Memory Products; Poultry; Roofing Materials*; and Seafood/Shrimp.

Commodities in Short Supply

Drywall; Roofing Materials; and Stretch Film.

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



JANUARY 2006 NON-MANUFACTURING INDEX SUMMARIES


Business Activity

ISM's Non-Manufacturing Business Activity Index in January decreased to 56.8 percent from December's seasonally adjusted 61 percent, indicating a slower rate of growth of activity in January. This month, eight sectors report increased business activity, five are reporting decreased activity, and three indicate unchanged activity compared to December.

The industries reporting the highest rates of growth of business activity in January are: Insurance; Business Services; Utilities; Mining; and Transportation. The industries reporting contraction of business activity in January are: Agriculture; Wholesale Trade; Real Estate; Retail Trade; and Construction.


Business Activity
%
Higher
%
Same
%
Lower

Index
January 2006 27 51 22 56.8
December 2005 31 52 17 61.0
November 2005 31 56 13 59.3
October 2005 31 54 15 59.2


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Jan '06 56.8   July '05 60.4
Dec '05 61.0   June '05 61.1
Nov '05 59.3   May '05 59.2
Oct '05 59.2   Apr '05 60.4
Sep '05 53.7   Mar '05 61.8
Aug '05 64.8   Feb '05 60.4
Average for 12 months – 59.8
High – 64.8
Low – 53.7

New Orders

ISM's Non-Manufacturing New Orders Index decreased to 56 percent in January from the seasonally adjusted 62.2 percent registered in December. This indicates continued expansion of new orders at a slower rate of growth than in December. Comments from members include: "The backload of work and new jobs won give us a stronger outlook for fiscal year 2006"; "Growth in business"; "Increased proposal and prospect activity"; and "More new restaurant openings."

Industries reporting the highest rates of growth of new orders in January are: Entertainment; Mining; Insurance; Transportation; and Health Services. The industries reporting contraction of new orders in January are: Agriculture; Real Estate; Retail Trade; and Wholesale Trade.


New Orders
%
Higher
%
Same
%
Lower

Index
January 2006 27 54 19 56.0
December 2005 32 55 13 62.2
November 2005 31 57 12 60.0
October 2005 27 58 15 58.5

Employment

Employment activity in the non-manufacturing sector increased at a slower rate in January compared to December. This was the 18th consecutive monthly increase in non-manufacturing employment. ISM's Non-Manufacturing Employment Index for January is 51.1 percent, a drop of 5.8 percentage points from December's seasonally adjusted 56.9 percent. Six industries are reporting increased employment, eight report decreases, and two indicate employment is unchanged from December. Comments from respondents include: "Reduction due to reduced business"; "Increased work levels"; "Added staffing at new stores"; and "Hiring for construction projects."

The industries reporting the highest rates of growth in employment in January are: Mining; Insurance; Transportation; Public Administration; and Other Services*. Industries reporting the highest rates of reduction in employment in January are: Entertainment; Agriculture; Wholesale Trade; Finance & Banking; and Construction.


Employment
%
Higher
%
Same
%
Lower

Index
January 2006 16 67 17 51.1
December 2005 21 70 9 56.9
November 2005 21 72 7 56.7
October 2005 16 72 12 53.1

Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations was slower for the 53rd consecutive month in January. The index registered 54.5 percent, 2 percentage points lower than in December and indicating that deliveries are slowing at a slower rate than in December. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in January include: "Suppliers not prepared for increased capital investment at year end"; "Increasing amount of worldwide major projects is continuing to strain manufacturing capacity for major plant-type processing equipment"; "Longer manufacturer leadtimes"; "Supplier inventories were depleted with 2005 year-end ordering"; and "Backlogs at manufacturers still high after Hurricanes Katrina and Rita."

The industries reporting the highest rates of slowing in supplier deliveries in January are: Utilities; Mining; Real Estate; Other Services*; and Construction. The industries reporting faster supplier deliveries in January are: Transportation and Communication.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
January 2006 14 81 5 54.5
December 2005 16 81 3 56.5
November 2005 22 77 1 60.5
October 2005 21 75 4 58.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 55 percent in January, indicating an increase in inventories (although at a slower rate of increase) compared to December. This is the third consecutive month of reported increases in non-manufacturing inventories. Of the total respondents in January, 31 percent indicate they do not have inventories or do not measure them. Comments from members include: "Year end — continue reduction of inventories to lower levels"; "Higher inventory is required to support new store operations"; and "Supplier leadtimes continue to increase."

The industries reporting the highest rates of increase in inventories in January are: Agriculture; Communication; Mining; Health Services; and Utilities. The industries reporting inventory decreases in January are: Entertainment; Finance & Banking; and Other Services*.


Inventories
%
Higher
%
Same
%
Lower

Index
January 2006 25 60 15 55.0
December 2005 28 56 16 56.0
November 2005 24 60 16 54.0
October 2005 26 48 26 50.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in January for the 46th consecutive month at the same seasonally adjusted rate of increase as in December. ISM's Non-Manufacturing Prices Index for January and December is 67.2 percent. In January, the percentage of respondents reporting higher prices increased from 33 percent in December to 37 percent, the proportion indicating no change decreased from 60 percent in December to 59 percent, and the number of respondents noting lower prices decreased from 7 percent in December to 4 percent.

The industries reporting the highest rates of increase in prices paid in January are: Entertainment; Transportation; Business Services; Insurance; and Utilities. No industry is reporting price decreases in January.


Prices
%
Higher
%
Same
%
Lower

Index
January 2006 37 59 4 67.2
December 2005 33 60 7 67.2
November 2005 44 48 8 70.8
October 2005 54 41 5 74.1

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index registered 52.5 percent in January, 1.5 percentage points less than the 54 percent reported in December. This indicates that order backlogs are increasing at a slower rate in January than in December. January's report of increasing order backlogs marks 32 out of the last 33 months that an increase has been reported in order backlogs. Of the total respondents in January, 45 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments on backlogs of orders include: "Increased capital investment at year end caused stockouts"; "Increased contracts and quotations"; and "New jobs being released by the public agencies along with past backlog of jobs give rise to our backlog of jobs."

The industries reporting the highest rates of increase in order backlogs in January are: Utilities; Mining; Construction; Finance & Banking; and Business Services. Industries reporting decreases in backlog of orders in January are: Agriculture; Communication; Wholesale Trade; Public Administration; and Retail Trade.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
January 2006 19 67 14 52.5
December 2005 21 66 13 54.0
November 2005 22 64 14 54.0
October 2005 23 64 13 55.0

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 increased for the seventh consecutive month in January. The January index marks 29 out of the past 30 months that the index has exhibited growth. The New Export Orders Index for January is 58 percent, compared to December's 61.5 percent. Of the total respondents in January, 79 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The industries reporting the highest rates of increase in new export orders in January are: Insurance; Mining; Other Services*; Wholesale Trade; and Business Services. Industries reporting decreases in new export orders in January are: Communication and Public Administration.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
January 2006 22 72 6 58.0
December 2005 34 55 11 61.5
November 2005 23 68 9 57.0
October 2005 23 63 14 54.5

Imports

In January, the ISM Non-Manufacturing Imports Index registered 49.5 percent, 7 percentage points less than December's 56.5 percent, and indicating that use of imports decreased in January (although at a very slow rate of decrease) for the first time in 33 months. In January, 67 percent of respondents reported that they do not use or do not track the use of imported materials.

The industries reporting an increase in the use of imports in January are: Entertainment; Transportation; Mining; Utilities; and Wholesale Trade. Industries reporting a decrease in the use of imports in January are: Business Services; Public Administration; Other Services*; and Retail Trade.


Imports
%
Higher
%
Same
%
Lower

Index
January 2006 14 71 15 49.5
December 2005 21 71 8 56.5
November 2005 22 69 9 56.5
October 2005 19 69 12 53.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in January registered 63 percent, 4 percentage points higher than the 59 percent reported in December. This indicates that non-manufacturing purchasing and supply executives feel a greater degree of discomfort with current levels of inventory in January than they did during December. In January, 31 percent of respondents felt their inventories were too high, 5 percent indicated their inventories were too low, and 64 percent said that their inventories were about right.

The industries reporting the highest rates of feeling that their inventories are too high in January are: Insurance; Entertainment; Communication; Other Services*; and Wholesale Trade. Industries reporting that their inventories are too low in January are: Public Administration and Utilities.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
January 2006 31 64 5 63.0
December 2005 27 64 9 59.0
November 2005 26 68 6 60.0
October 2005 22 66 12 55.0

*Other Services include:
Hotels, Rooming Houses, Camps, and Other Lodging Places; Personal Services; Automotive Repair, Services, and Parking; Miscellaneous Repair Services; Educational Services; Social Services; Museums, Art Galleries, and Botanical and Zoological Gardens; Membership Organizations; Engineering, Accounting, Research, Management and Related Services; and Miscellaneous Services.

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 monthly replies to questions asked of approximately 370 purchasing and supply executives in over 62 different industries representing nine divisions from the Standard Industrial Classification (SIC) categories. Membership of the Business Survey Committee is diversified by SIC category and is based on each industry's contribution to gross domestic product (GDP).

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, the net difference between the number of responses in the positive economic direction (higher and slower for Supplier Deliveries) and the negative economic direction (lower and faster for Supplier Deliveries). Responses represent raw data and are never changed. Data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. The remaining indexes have not indicated significant seasonality.

A weighted composite index similar to the PMI that is so popular in the Manufacturing ISM Report On Business® is not available. Several years of data will need to be developed before that type of non-manufacturing indicator can be developed. 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 February 2006 data will be released at 10:00 a.m. (ET) on March 3, 2006.


Back to Top




Rate and Review this item

Rate this item:



Log in to rate or review this item.