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December 2011 Non-Manufacturing ISM Report On Business®

FOR RELEASE: January 5, 2012


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


NMI at 52.6%

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 December 2011.


Business Activity Index at 56.2%
New Orders Index at 53.2%
Employment Index at 49.4%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in December for the 25th 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. "The NMI registered 52.6 percent in December, 0.6 percentage point higher than the 52 percent registered in November, and indicating continued growth at a slightly faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index registered 56.2 percent, which is the same reading as reported in November, reflecting growth for the 29th consecutive month. The New Orders Index increased by 0.2 percentage point to 53.2 percent. The Employment Index increased 0.5 percentage point to 49.4 percent, indicating contraction in employment for the third time in the last four months. The Prices Index decreased 1.3 percentage points to 61.2 percent, indicating prices increased at a slower rate in December when compared to November. According to the NMI, 11 non-manufacturing industries reported growth in December. Respondents' comments are mixed and vary by industry and company. Economic growth continues to be slowed by the lag in employment."

INDUSTRY PERFORMANCE (Based on the NMI)

The 11 non-manufacturing industries reporting growth in December based on the NMI composite index — listed in order — are: Retail Trade; Professional, Scientific & Technical Services; Finance & Insurance; Information; Construction; Other Services; Wholesale Trade; Public Administration; Educational Services; Mining; and Transportation & Warehousing. The seven industries reporting contraction in December — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Health Care & Social Assistance; Real Estate, Rental & Leasing; Accommodation & Food Services; Utilities; and Arts, Entertainment & Recreation.

WHAT RESPONDENTS ARE SAYING ...
  • "Year-end uptick in activity." (Finance & Insurance)
  • "Business is stabilizing — some good signs in the private sector for commercial construction." (Construction)
  • "Some additional proposal requests, but clients continue to delay decisions on capital spending. Expect first quarter 2012 activity to be sluggish." (Professional, Scientific & Technical Services)
  • "Automotive industry growth seems to be outpacing the rest of the economy." (Information)
  • "Demand increasing gradually." (Wholesale Trade)
  • "Business is holding steady. Outlook for December and first quarter 2012 is good." (Retail Trade)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
DECEMBER 2011
  Non-Manufacturing Manufacturing
Index Series
Index
Dec
Series
Index
Nov
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Dec
Series
Index
Nov
Percent
Point
Change
NMI/PMI 52.6 52.0 +0.6 Growing Faster 25 53.9 52.7 +1.2
Business Activity/Production 56.2 56.2 0.0 Growing Same 29 59.9 56.6 +3.3
New Orders 53.2 53.0 +0.2 Growing Faster 29 57.6 56.7 +0.9
Employment 49.4 48.9 +0.5 Contracting Slower 2 55.1 51.8 +3.3
Supplier Deliveries 51.5 50.0 +1.5 Slower From Unchanged 1 49.9 49.9 0.0
Inventories 48.5 52.5 -4.0 Contracting From Growing 1 47.1 48.3 -1.2
Prices 61.2 62.5 -1.3 Increasing Slower 29 47.5 45.0 +2.5
Backlog of Orders 45.5 48.0 -2.5 Contracting Faster 3 48.0 45.0 +3.0
New Export Orders 51.0 55.5 -4.5 Growing Slower 5 53.0 52.0 +1.0
Imports 54.0 48.5 +5.5 Growing From Contracting 1 54.0 49.0 +5.0
Inventory Sentiment 59.5 63.0 -3.5 Too High Slower 175 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 42.5 50.0 -7.5

* 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 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

Coffee; #1 Diesel Fuel; #2 Diesel Fuel (2); Food Products (2); Gloves (2); Medical Supplies; Professional Labor; Protein; and Steel.

Commodities Down in Price

Fuel (2); and Gasoline.

Commodities in Short Supply

#2 Diesel Fuel is the only commodity reported in short supply.

Note: The number of consecutive months the commodity is listed is indicated after each item.



DECEMBER 2011 NON-MANUFACTURING INDEX SUMMARIES


NMI

In December, the NMI registered 52.6 percent, indicating continued growth in the non-manufacturing sector for the 25th 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
Dec 2011 52.6 Jun 2011 53.3
Nov 2011 52.0 May 2011 54.6
Oct 2011 52.9 Apr 2011 52.8
Sep 2011 53.0 Mar 2011 57.3
Aug 2011 53.3 Feb 2011 59.7
Jul 2011 52.7 Jan 2011 59.4
Average for 12 months – 54.5
High – 59.7
Low – 52.0

Business Activity

ISM's Non-Manufacturing Business Activity Index in December registered 56.2 percent, the same percent registered in November. Eleven industries reported increased business activity, and six industries reported decreased activity for the month of December. Comments from respondents include: "End of year spending with remaining budgets" and "Seasonal increases, but no significant increases beyond that."

The industries reporting growth of business activity in December — listed in order — are: Retail Trade; Other Services; Information; Finance & Insurance; Professional, Scientific & Technical Services; Educational Services; Mining; Public Administration; Construction; Wholesale Trade; and Accommodation & Food Services. The industries reporting decreased business activity in December — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Utilities; Health Care & Social Assistance; Transportation & Warehousing; and Arts, Entertainment & Recreation.


Business Activity
%
Higher
%
Same
%
Lower

Index
Dec 2011 28 54 18 56.2
Nov 2011 26 55 19 56.2
Oct 2011 24 57 19 53.8
Sep 2011 27 59 14 57.1

New Orders

ISM's Non-Manufacturing New Orders Index grew in December for the 29th consecutive month. The index registered 53.2 percent, an increase of 0.2 percentage point from the 53 percent reported in November. Comments from respondents include: "Increased requisitions" and "Year-end spending requests."

The 10 industries reporting growth of new orders in December — listed in order — are: Arts, Entertainment & Recreation; Retail Trade; Professional, Scientific & Technical Services; Information; Other Services; Finance & Insurance; Wholesale Trade; Public Administration; Construction; and Utilities. The four industries reporting contraction of new orders in December are: Transportation & Warehousing; Health Care & Social Assistance; Management of Companies & Support Services; and Accommodation & Food Services.


New Orders
%
Higher
%
Same
%
Lower

Index
Dec 2011 24 57 19 53.2
Nov 2011 23 61 16 53.0
Oct 2011 23 57 20 52.4
Sep 2011 25 60 15 56.5

Employment

Employment activity in the non-manufacturing sector contracted in December for the third time in four months, as ISM's Non-Manufacturing Employment Index registered 49.4 percent. This reflects an increase of 0.5 percentage point when compared to the 48.9 percent registered in November. Six industries reported increased employment, nine industries reported decreased employment, and three industries reported unchanged employment compared to November. Comments from respondents include: "Retirees not being replaced" and "Still in holding pattern; positions are available, but are not being filled."

The industries reporting an increase in employment in December — listed in order — are: Transportation & Warehousing; Retail Trade; Wholesale Trade; Utilities; Construction; and Finance & Insurance. The industries reporting a reduction in employment in December — listed in order — are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Management of Companies & Support Services; Health Care & Social Assistance; Other Services; Mining; and Professional, Scientific & Technical Services.


Employment
%
Higher
%
Same
%
Lower

Index
Dec 2011 14 68 18 49.4
Nov 2011 15 68 17 48.9
Oct 2011 16 64 20 53.3
Sep 2011 10 73 17 48.7

Supplier Deliveries

The Supplier Deliveries Index registered 51.5 percent in December, 1.5 percentage points higher than the 50 percent registered in November, indicating that supplier deliveries were slower in December. A reading above 50 percent indicates slower deliveries.

The seven industries reporting slower deliveries in December — listed in order — are: Transportation & Warehousing; Mining; Accommodation & Food Services; Construction; Professional, Scientific & Technical Services; Health Care & Social Assistance; and Public Administration. The five industries reporting faster supplier deliveries in December are: Agriculture, Forestry, Fishing & Hunting; Retail Trade; Utilities; Information; and Wholesale Trade. Six industries reported no change in supplier deliveries in December compared to November.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Dec 2011 9 85 6 51.5
Nov 2011 4 92 4 50.0
Oct 2011 7 90 3 52.0
Sep 2011 6 87 7 49.5

Inventories

ISM's Non-Manufacturing Inventories Index contracted in December after one month of growth. The index registered 48.5 percent, which is 4 percentage points lower than the 52.5 percent reading that was reported in November. Of the total respondents in December, 24 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Annual [reduction] to get inventories down before taxes" and "Reducing excess to optimize inventory."

The four industries reporting an increase in inventories in December are: Retail Trade; Mining; Information; and Accommodation & Food Services. The eight industries reporting decreases in inventories in December — listed in order — are: Other Services; Construction; Utilities; Transportation & Warehousing; Finance & Insurance; Health Care & Social Assistance; Public Administration; and Professional, Scientific & Technical Services.


Inventories
%
Higher
%
Same
%
Lower

Index
Dec 2011 19 59 22 48.5
Nov 2011 20 65 15 52.5
Oct 2011 14 63 23 45.5
Sep 2011 19 65 16 51.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased at a slower rate in December. ISM's Non-Manufacturing Prices Index for December registered 61.2 percent, 1.3 percentage points lower than the 62.5 percent reported in November. In December, the percentage of respondents reporting higher prices is 23 percent, the percentage indicating no change in prices paid is 70 percent, and 7 percent of the respondents reported lower prices.

Twelve non-manufacturing industries reported an increase in prices paid, in the following order: Wholesale Trade; Information; Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Health Care & Social Assistance; Educational Services; Other Services; Mining; Accommodation & Food Services; Utilities; Construction; and Finance & Insurance. The two industries reporting a decrease in prices paid are: Retail Trade; and Management of Companies & Support Services.


Prices
%
Higher
%
Same
%
Lower

Index
Dec 2011 23 70 7 61.2
Nov 2011 23 72 5 62.5
Oct 2011 21 68 11 57.1
Sep 2011 24 69 7 61.9

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in December for the sixth time in seven months. The index registered 45.5 percent, 2.5 percentage points lower than the 48 percent reported in November. Of the total respondents in December, 37 percent indicated they do not measure backlog of orders.

The two industries reporting an increase in order backlogs in December are: Transportation & Warehousing; and Professional, Scientific & Technical Services. The six industries reporting lower backlog of orders in December — listed in order — are: Management of Companies & Support Services; Health Care & Social Assistance; Information; Finance & Insurance; Public Administration; and Wholesale Trade. Nine industries reported no change in order backlogs for the month of December compared to November.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Dec 2011 11 69 20 45.5
Nov 2011 13 70 17 48.0
Oct 2011 10 74 16 47.0
Sep 2011 13 79 8 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 grew in December for the fifth consecutive month. The New Export Orders Index for December registered 51 percent, which is 4.5 percentage points lower than the 55.5 percent reported in November. Of the total respondents in December, 71 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The five industries reporting an increase in new export orders in December are: Arts, Entertainment & Recreation; Construction; Mining; Transportation & Warehousing; and Other Services. The three industries reporting a decrease in export orders in December are: Accommodation & Food Services; Professional, Scientific & Technical Services; and Wholesale Trade. Seven industries reported no change in new export orders in December compared to November.


New Export Orders
%
Higher
%
Same
%
Lower

Index
Dec 2011 16 70 14 51.0
Nov 2011 18 75 7 55.5
Oct 2011 21 66 13 54.0
Sep 2011 15 74 11 52.0

Imports

The ISM Non-Manufacturing Imports Index grew in December after three months of contraction. The index registered 54 percent, which is 5.5 percentage points higher than the 48.5 percent reported in November. Sixty percent of respondents reported that they do not use, or do not track, the use of imported materials.

The six industries reporting an increase in the use of imports in December — listed in order — are: Information; Arts, Entertainment & Recreation; Retail Trade; Construction; Professional, Scientific & Technical Services; and Wholesale Trade. The only industry reporting a decrease in imports for the month of December is Management of Companies & Support Services. Eleven industries reported no change in imports for the month of December compared to November.


Imports
%
Higher
%
Same
%
Lower

Index
Dec 2011 13 82 5 54.0
Nov 2011 12 73 15 48.5
Oct 2011 10 76 14 48.0
Sep 2011 8 79 13 47.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in December registered 59.5 percent, which is 3.5 percentage points lower than the 63 percent reported in November. This indicates that respondents believe their inventories are still too high at this time. In December, 26 percent of respondents said their inventories were too high, 7 percent said their inventories were too low, and 67 percent said their inventories were about right.

The nine industries reporting a feeling that their inventories are too high in December — listed in order — are: Management of Companies & Support Services; Arts, Entertainment & Recreation; Utilities; Other Services; Mining; Finance & Insurance; Public Administration; Health Care & Social Assistance; and Wholesale Trade. The two industries reporting that their inventories are too low in December are: Retail Trade; and Construction.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Dec 2011 26 67 7 59.5
Nov 2011 31 64 5 63.0
Oct 2011 20 75 5 57.5
Sep 2011 21 76 3 59.0

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 (Non-Manufacturing Index) 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® surveys are sent out to Non-Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM then compiles the reports for release on the third business day of the following month.

The industries reporting growth, as indicated in the Non-Manufacturing ISM Report On Business® monthly reports, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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 website 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 January 2012 data will be released at 10:00 a.m. (ET) on Friday, February 3, 2012.



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