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FOR RELEASE: May 3, 2006


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


April 2006 Non-Manufacturing ISM Report On Business®

Business Activity at 63%


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 April 2006.

New Orders Index at 64.6%
Employment Index at 56.5%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased in April 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 37th consecutive month in April," Kauffman said. He added, "Business Activity and New Orders increased at faster rates in April than in March. Prices, Inventories, Backlog of Orders and Employment also increased at faster rates. New Export Orders and Imports increased at slower rates than in March. Fourteen of 17 non-manufacturing industry sectors report increased activity in April, compared to 13 that reported increased activity in March. Members' comments in April are mostly positive concerning current business conditions, with a number of them indicating that this month's faster rate of increase of inventories is due to increased business or the expectation of increased business activity. Price increases have again become a significant area of concern for many members as a result of recent fuel price increases. The Prices Index jumped 10 points this month to 70.5 percent, a level not seen since November 2005 when the index was 70.8 percent. The overall indication in April is continued economic growth in the non-manufacturing sector."

TOP PERFORMING INDUSTRIES

The 14 industries reporting growth in April — listed in order — are: Real Estate; Entertainment; Mining; Other Services*; Utilities; Construction; Retail Trade; Public Administration; Finance & Banking; Communication; Health Services; Wholesale Trade; Business Services; and Insurance. The two industries reporting activity the same as last month are: Agriculture and Legal Services. The one industry reporting decreased activity from March to April is Transportation.

WHAT RESPONDENTS ARE SAYING ...
  • "Raw materials continue to escalate in cost, driving the raw materials costs to our suppliers up and in turn our costs." (Communication)
  • "High energy costs could affect savings rates and balances." (Finance & Banking)
  • "Business activity is good and growing." (Insurance)
  • "Demand for coal remains high. Our sales of mine supplies is at the highest level." (Mining)
  • "Conditions are less than rosy as material costs continue to be impacted by fuel and transportation costs. Rising mineral costs and diminishing supply are also rippling through." (Retail Trade)
  • "Continued business growth slowed by material delays." (Utilities)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
APRIL 2006
  Non-Manufacturing Manufacturing
Index Series
Index
Apr.		 Series
Index
Mar.		 Percent
Point
Change		 Direction Rate
of
Change		 Trend**
(Months)		 Series
Index
Apr.		 Series
Index
Mar.		 Percent
Point
Change
Business Activity/Production 63.0 60.5 +2.5 Increasing Faster 37 60.4 57.5 +2.9
New Orders 64.6 59.5 +5.1 Increasing Faster 37 57.6 58.4 -0.8
Employment 56.5 54.6 +1.9 Increasing Faster 21 55.8 52.5 +3.3
Supplier Deliveries 54.5 54.0 +0.5 Slowing Faster 56 57.7 53.1 +4.6
Inventories 59.0 54.0 +5.0 Increasing Faster 6 51.3 48.7 +2.6
Prices 70.5 60.5 +10.0 Increasing Faster 49 71.5 66.5 +5.0
Backlog of Orders 54.0 50.5 +3.5 Increasing Faster 15 57.0 59.5 -2.5
New Export Orders 59.5 63.5 -4.0 Increasing Slower 10 53.4 57.3 -3.9
Imports 57.0 60.5 -3.5 Increasing Slower 3 59.0 57.0 +2.0
Inventory Sentiment 60.0 63.0 -3.0 "Too High" Lesser 107 N/A N/A N/A
Customers' Inventories N/A N/A         46.5 48.0 -1.5

* 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

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

Commodities Up in Price

Air Fares (2); Aluminum (5); Asphalt; Asphalt Oils; Asphalt Products; Asphalt Raw Materials; Cable; Cardboard; Chemicals; Construction Labor; Contractors — Construction and General; Copper (32); Copper Products (various) (6); Copy Paper (3); Corrugated (6); #1 Diesel Fuel (2); #2 Diesel Fuel (16); Electricity; Energy (2); Envelopes; Freight/Shipping/Transportation Costs (2); Fuel (29); Fuel Surcharges; Gasoline (29); #2 Heating Oil; Insulation; Lettuce; Metals; Natural Gas*; Office/Computer Supplies; Paper (27); Paper (cut size) (2); Paper Products (3); Petroleum/Petroleum Based Products (4); PVC*; Roofing Materials; Rubber Based or Related Products (2); Steel (3); Steel Plate; Tires; Unleaded Gasoline; Utility Vehicles; Wallboard; and Wire.

Commodities Down in Price

Computer Memory; Natural Gas*; Lumber — Pine, Spruce and Treated; PVC*; and PVC Conduit and Pipe.

Commodities in Short Supply

Asphalt/Asphalt Products; Asphalt Oils/Raw Materials; Copper; Roofing Shingles/Materials (4); Skilled Labor (2); Steel/Steel Products (3); Tires; Valves; and Wallboard (3).

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

APRIL 2006 NON-MANUFACTURING INDEX SUMMARIES

Business Activity

ISM's Non-Manufacturing Business Activity Index in April increased to 63 percent from the 60.5 percent registered in March, indicating a faster rate of growth of activity in April. The implication is that non-manufacturing business activity is continuing to increase strongly for the 37th consecutive month. The average of the Business Activity Index for the past 12 months increased slightly in April, moving from 59.7 to 59.9 percent, and reflecting the continued strength of this sector of the U.S. economy. The faster rate of growth indicated by this index is also reflected in other indexes this month: a 5.1 percentage point rise in the New Orders Index, a 3.5 percentage point rise in the Backlog of Orders Index, and a 1.9 percentage point rise in the Employment Index. Increased inventories to support the current level of business activity were also indicated this month by a 5 percentage point rise in the Inventories Index. This month, 14 sectors report increased business activity, one is reporting decreased activity, and two indicate unchanged activity compared to March.

The industries reporting the highest rates of growth of business activity in April are: Real Estate; Entertainment; Mining; Other Services*; and Utilities. The one industry reporting contraction of business activity in April is Transportation.


Business Activity		 %
Higher		 %
Same		 %
Lower
Index
April 2006 42 49 9 63.0
March 2006 37 53 10 60.5
February 2006 31 57 12 60.1
January 2006 27 51 22 56.8


THE LAST 12 MONTHS
Month Business
Activity Index		   Month Business
Activity Index
Apr '06 63.0   Oct '05 59.2
Mar '06 60.5   Sep '05 53.7
Feb '06 60.1   Aug '05 64.8
Jan '06 56.8   July '05 60.4
Dec '05 61.0   June '05 61.1
Nov '05 59.3   May '05 59.2
Average for 12 months – 59.9
High – 64.8
Low – 53.7

New Orders

ISM's Non-Manufacturing New Orders Index increased to 64.6 percent in April from the 59.5 percent registered in March. This indicates continued expansion of new orders at a faster rate of growth than in March. Comments from members include: "More subcontract work"; "Business is increasing — projects starting"; "Large capital purchases fueling activity"; and "Growth in business."

Industries reporting the highest rates of growth of new orders in April are: Real Estate; Construction; Mining; Utilities; and Entertainment. The one industry reporting contraction of new orders in April is Transportation.


New Orders		 %
Higher		 %
Same		 %
Lower
Index
April 2006 41 50 9 64.6
March 2006 32 57 11 59.5
February 2006 27 59 14 56.2
January 2006 27 54 19 56.0

Employment

Employment activity in the non-manufacturing sector increased at a faster rate in April compared to March. This was the 21st consecutive monthly increase in non-manufacturing employment. ISM's Non-Manufacturing Employment Index for April is 56.5 percent, a rise of 1.9 percentage points from March's 54.6 percent. Thirteen industries are reporting increased employment, one reports a decrease, and three indicate employment is unchanged from March. Comments from respondents include: "Needs are increasing"; "Cannot find enough qualified personnel"; "Backlog of positions waiting for people"; and "Increased sales have increased the need for employees."

The industries reporting the highest rates of growth in employment in April are: Mining; Entertainment; Finance & Banking; Communication; Business Services; Construction; and Transportation. The one industry reporting a reduction in employment in April is Insurance.


Employment		 %
Higher		 %
Same		 %
Lower
Index
April 2006 25 67 8 56.5
March 2006 18 74 8 54.6
February 2006 21 69 10 58.2
January 2006 16 67 17 51.1

Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations was slower for the 56th consecutive month in April. The index registered 54.5 percent, 0.5 percentage point higher than in March, indicating that deliveries are slowing at a faster rate than in March. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in April include: "Lack of raw materials"; "Too much demand for valves"; "Drywall allocations are affecting the supply chain"; and "Backlogs at factory level, occasional lack of freight carriers."

The industries reporting the highest rates of slowing in supplier deliveries in April are: Construction; Utilities; Transportation; Communication; and Other Services*. Industries reporting faster supplier deliveries in April are: Insurance and Public Administration.


Supplier Deliveries		 %
Slower		 %
Same		 %
Faster
Index
April 2006 11 87 2 54.5
March 2006 9 90 1 54.0
February 2006 8 89 3 52.5
January 2006 14 81 5 54.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 59 percent in April, indicating an increase in inventories at a faster rate of increase compared to March. This is the sixth consecutive month of reported increases in non-manufacturing inventories. Of the total respondents in April, 31 percent indicate they do not have inventories or do not measure them. Comments from members include: "Increased work requires increased inventory"; "Increased inventory to support spring maintenance outages"; "Inventory levels have increased due to the increase in business"; and "Renewed emphasis in inventory reduction programs."

The industries reporting the highest rates of increase in inventories in April are: Agriculture; Mining; Insurance; Real Estate; Wholesale Trade; and Business Services. The one industry reporting an inventory decrease in April is Transportation.


Inventories		 %
Higher		 %
Same		 %
Lower
Index
April 2006 26 66 8 59.0
March 2006 25 58 17 54.0
February 2006 24 58 18 53.0
January 2006 25 60 15 55.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in April for the 49th consecutive month. ISM's Non-Manufacturing Prices Index for April is 70.5 percent, 10 percentage points higher than March's 60.5 percent. In April, the percentage of respondents reporting higher prices increased from 36 percent in March to 54 percent, the proportion indicating no change decreased from 58 percent in March to 44 percent, and the number of respondents noting lower prices decreased from 6 percent in March to 2 percent in April. All industries reported an increase in prices in April.

The industries reporting the highest rates of increase in prices paid in April are: Agriculture; Construction; Legal Services; Communication; and Finance & Banking.


Prices		 %
Higher		 %
Same		 %
Lower
Index
April 2006 54 44 2 70.5
March 2006 36 58 6 60.5
February 2006 39 57 4 64.8
January 2006 37 59 4 67.2

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index registered 54 percent in April, 3.5 percentage points higher than the 50.5 percent reported in March. This indicates that order backlogs are increasing at a faster rate in April than in March. April's report of increasing order backlogs marks 35 of the last 36 months that an increase has been reported in order backlogs. Of the total respondents in April, 43 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments on backlogs of orders include: "Continue to get more work than capacity"; "Higher demand/longer waits"; "Staff has been added resulting in a reduced backlog"; and "More suppliers continue not to inventory [completed products], but [rather] assemble to fill purchase requests."

The industries reporting the highest rates of increase in order backlogs in April are: Mining; Transportation; Construction; Insurance; Communication; and Other Services*. Industries reporting decreases in backlog of orders in April are: Health Services; Finance & Banking; and Retail Trade.


Backlog of Orders		 %
Higher		 %
Same		 %
Lower
Index
April 2006 22 64 14 54.0
March 2006 11 79 10 50.5
February 2006 18 72 10 54.0
January 2006 19 67 14 52.5

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 increased for the 10th consecutive month in April. The April index marks 32 of the past 33 months that the index has exhibited growth. The New Export Orders Index for April is 59.5 percent, compared to March's 63.5 percent. Of the total respondents in April, 75 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The industries reporting increases in new export orders in April are: Insurance; Retail Trade; Other Services*; and Wholesale Trade. Industries reporting decreases in new export orders in April are: Health Services; Public Administration; and Communication.

New
Export Orders		 %
Higher		 %
Same		 %
Lower
Index
April 2006 28 63 9 59.5
March 2006 32 63 5 63.5
February 2006 28 64 8 60.0
January 2006 22 72 6 58.0

Imports

In April, the ISM Non-Manufacturing Imports Index registered 57 percent, 3.5 percentage points lower than March's 60.5 percent, and indicating that use of imports increased in April for the third consecutive month. In April, 66 percent of respondents reported that they do not use or do not track the use of imported materials.

The industries reporting the highest rates of increase in the use of imports in April are: Transportation; Communication; Utilities; Business Services and Other Services*. The one industry reporting a decrease in the use of imports in April is Public Administration.


Imports		 %
Higher		 %
Same		 %
Lower
Index
April 2006 19 76 5 57.0
March 2006 24 73 3 60.5
February 2006 15 80 5 55.0
January 2006 14 71 15 49.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in April registered 60 percent, 3 percentage points lower than the 63 percent reported in March. This indicates that non-manufacturing purchasing and supply executives feel a lesser degree of discomfort with current levels of inventory in April than they did during March. In April, 27 percent of respondents felt their inventories were too high, 7 percent indicated their inventories were too low, and 66 percent said that their inventories were about right.

The industries reporting the highest rates of feeling that their inventories are too high in April are: Communication; Wholesale Trade; Business Services; Retail Trade; and Health Services. Industries reporting that their inventories are too low in April are: Transportation and Public Administration.


Inventory Sentiment		 %Too
High		 %About
Right		 %Too
Low
Index
April 2006 27 66 7 60.0
March 2006 28 70 2 63.0
February 2006 33 61 6 63.5
January 2006 31 64 5 63.0

*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 May 2006 data will be released at 10:00 a.m. (ET) on June 5, 2006.


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