FOR RELEASE: November 3, 2005
|Contact:||Rose Marie Goupil|
|ISM, Media Relations|
|800/888-6276, Ext. 3015|
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 October 2005.
(Tempe, Arizona) — Business activity in the non-manufacturing sector increased in October 2005, 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 31st consecutive month in October," Kauffman said. He added, "Business Activity increased at a faster rate in October than in September. Order Backlogs and New Orders also increased at faster rates, but Employment increased at a slower rate. Eleven of 17 non-manufacturing industry sectors report increased activity in October compared to eight that reported increased activity in September. Concern about the continued high level of energy prices and its impact on economic activity is again the number one topic on which survey respondents commented. Respondents also commented on Hurricanes Katrina and Rita and their impact on the energy supply and on the availability and cost of construction materials and truck transportation. The overall indication is continued economic growth in the non-manufacturing sector in October, but with a high level of concern about the impact of energy prices."
The 11 industries reporting growth in October — listed in order — are: Entertainment; Insurance; Communication; Health Services; Utilities; Other Services*; Construction; Retail Trade; Finance & Banking; Wholesale Trade; and Business Services. The three industries reporting activity the same as last month are: Mining; Real Estate; and Legal Services. The three industries reporting decreased activity from September to October are: Agriculture; Transportation; and Public Administration.
|ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
|Business Activity / Production||60.0||53.3||+6.7||Increasing||Faster||31||62.0||63.1||-1.1|
|Backlog of Orders||55.0||52.0||+3.0||Increasing||Faster||9||55.5||55.0||+0.5|
|New Export Orders||54.5||55.0||-0.5||Increasing||Slower||4||54.8||56.9||-2.1|
|Inventory Sentiment||55.0||64.0||-9.0||"Too High"||Lesser||101||N/A||N/A|
* Non-Manufacturing ISM Reports On Business® data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. Manufacturing ISM Reports On Business® data is seasonally adjusted except for Backlog of Orders, Prices and Customers' Inventories.
** Number of months moving in current direction
Airfares (7); Building Materials (2); Carpet; Cement (2); Cheese; Chemicals; Concrete; Construction/Construction Services (6); Construction Labor; Construction Materials; Copper (26); Dairy Products; #1 Diesel Fuel (8); #2 Diesel Fuel (10); Electricity; Energy (4); Energy-Related; Food/Food & Beverage; Freight Charges/Shipping Costs (4); Fuel (23); Fuel-Related Surcharges (4); Gasoline* (23); #2 Heating Oil (2); Hotel Rates/Costs (11); Janitorial Supplies; Lumber (2); Lumber Products; Natural Gas (5); Oil; Oil-Based Products (3); Packaging Supplies/Products (2); Paper/Paper Products (21); Petroleum/Petroleum-Based Products (4); Plastic Bags (2); Plastics/Plastic Products (4); Plywood; Poly Bags; Poly Products (various); Polyethylene Films (2); Printing/Printed Materials; PVC (2); Resin-Based (or related) Products; Roofing Materials (2); Steel (2); Steel Pipe; Stretch Film/Wrap (2); Transportation (3); Travel Costs; Tube Fittings/Tubing; and Vinyl.
Beef/Steaks/Frozen Beef; Corn; Corrugated (3); Gasoline*; Office Products/Supplies; Soybean Material/Meal; and Unleaded Gasoline.
Construction Materials; Fuel; Petrochemicals; Plastic Products; Polyethylene; PVC (2); PVC Products; Resin-Based Products; Roofing Materials; Stretch Film/Wrap (2); and Tires.
*Reported as both up and down in price.
Note: The number of consecutive months the commodity is listed is indicated after each item.
ISM's Non-Manufacturing Business Activity Index in October rebounded somewhat to 60 percent from September's drop to 53.3 percent, indicating a faster rate of growth of activity in October. This month, 11 sectors report increased business activity, three are reporting decreased activity, and three indicate unchanged activity compared to September.
The industries reporting the highest rates of growth of business activity in October are: Entertainment; Insurance; Communication; Health Services; and Utilities. The industries reporting contraction of business activity in October are: Agriculture; Transportation; and Public Administration.
|THE LAST 12 MONTHS|
|Oct '05||60.0||Apr '05||61.7|
|Sep '05||53.3||Mar '05||63.1|
|Aug '05||65.0||Feb '05||59.8|
|July '05||60.5||Jan '05||59.2|
|June '05||62.2||Dec '04||63.9|
|May '05||58.5||Nov '04||61.9|
|Average for 12 months 60.8
ISM's Non-Manufacturing New Orders Index increased to 58.2 percent in October from 56.6 percent in September. This indicates continued expansion of new orders at a faster rate of growth than in September. Comments from members include: "Our order position for November and December has improved significantly"; "New Orleans system rebuild"; "Business turnaround"; and "Growth and expansion."
Industries reporting the highest rates of growth of new orders in October are: Insurance; Communication; Health Services; Entertainment; and Utilities. Industries reporting contraction of new orders in October are: Agriculture; Transportation; Public Administration; Finance & Banking; and Business Services.
Employment activity in the non-manufacturing sector increased, but at a slower rate in October compared to September. This was the 25th consecutive monthly increase in non-manufacturing employment. ISM's Non-Manufacturing Employment Index for October is 52.9 percent, a drop of 2 percentage points from September's 54.9 percent. Nine industries are reporting increased employment, four report decreases, and four indicate employment is unchanged from September. Comments from respondents include: "Filling of many empty positions"; "More IT employees hired for special projects"; "New positions added"; and "Will be hiring to support higher levels."
The industries reporting the highest rates of growth in employment in October are: Mining; Health Services; Entertainment; Utilities; and Insurance. Industries reporting a reduction in employment in October are: Legal Services; Transportation; Wholesale Trade; and Other Services*.
The delivery performance of suppliers to non-manufacturing organizations was slower for the 50th consecutive month in October. The index registered 58.5 percent, 2.5 percentage points higher than in September. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in October include: "Slower rail delivery"; "Problems of availability of castings for valve bodies, more demand for products needed to build energy transportation facilities"; "FEMA has tied up lots of trucks"; "Transportation and void in raw material manufacturing due to Gulf [Coast] disaster"; and "Supplier order backlog."
The industries reporting the highest rates of slowing in supplier deliveries in October are: Wholesale Trade; Construction; Utilities; Entertainment; and Agriculture. Industries reporting faster supplier deliveries in October are: Mining; Transportation; and Insurance.
ISM's Non-Manufacturing Inventories Index registered 50 percent in October, the same as in September. This month's and last month's reports indicate that inventories did not change from August, which ended seven consecutive months of higher inventories. Of the total respondents in October, 30 percent indicate they do not have inventories or do not measure them. Comments from members include: "Problems managing reverse logistics"; "Added new products to inventory system"; "Boosted inventories during storm recovery operations"; and "Trying to reduce our inventory."
The industries reporting inventory increases in October are: Construction; Communication; Real Estate; Health Services; Business Services; and Retail Trade. The industries reporting the highest rates of inventory decrease in October are: Legal Services; Insurance; Finance & Banking; Agriculture; and Other Services*.
Prices paid by non-manufacturing organizations for purchased materials and services increased in October for the 29th consecutive month, but at a slower rate of increase than in September. ISM's Non-Manufacturing Prices Index for October is 78 percent, 3.4 percentage points below the record 81.4 percent registered for September. In October, the percentage of respondents reporting higher prices declined from 58 percent to 54 percent, the proportion indicating no change rose from 40 percent to 41 percent, and the number of respondents noting lower prices increased from 2 percent to 5 percent.
The industries reporting the highest rates of increase in prices paid in October are: Mining; Utilities; Wholesale Trade; Agriculture; Construction; and Entertainment. No industry is reporting price decreases in October.
ISM's Non-Manufacturing Backlog of Orders Index registered 55 percent in October, 3 percentage points higher than the 52 percent reported in September. October's report of increasing order backlogs marks 29 out of the last 30 months that an increase has been reported in order backlogs. Of the total respondents in October, 44 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments on backlogs of orders include: "High demand not matching supply"; "Impact of hurricanes on deliveries and some supply items"; and "Push out on delivery dates by suppliers."
The industries reporting increases in order backlogs in October are: Insurance; Communication; Utilities; Construction; Retail Trade; Wholesale Trade; and Other Services*. Industries reporting the highest rates of decrease in backlog of orders in October are: Agriculture; Finance & Banking; Business Services; Health Services; and Public Administration.
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 fourth consecutive month in October. The October index marks 26 out of the past 27 months that the index has exhibited growth. The New Export Orders Index for October is 54.5 percent, compared to September's 55 percent. Of the total respondents in October, 80 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 October are: Construction; Finance & Banking; Insurance; Entertainment; and Wholesale Trade. Industries reporting decreases in new export orders in October are: Business Services; Communication; and Public Administration.
In October, the ISM Imports Index registered 53.5 percent, 5 percentage points lower than the 58.5 percent reported in September. This indicates that use of imported materials by non-manufacturing industries increased at a slower rate in October than in September. October's index marks the 30th consecutive month of import growth. In October, 67 percent of respondents reported that they do not use or do not track the use of imported materials.
The industries reporting increases in the use of imports in October are: Utilities; Business Services; Wholesale Trade; and Retail Trade. Industries reporting decreases in the use of imports in October are: Public Administration and Health Services.
The ISM Non-Manufacturing Inventory Sentiment Index in October registered 55 percent, 9 percentage points lower than the 64 percent reported in September. This indicates that non-manufacturing purchasing and supply executives feel a much lesser degree of discomfort with current levels of inventory in October than they did during September. In fact, this is the least degree of discomfort with high inventory levels that respondents have reported since inception of ISM's non-manufacturing business survey in 1997. In October, 22 percent of respondents felt their inventories were too high,12 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 October are: Construction; Communication; Other Services*; Public Administration; and Business Services. Industries reporting that their inventories are too low in October are: Finance & Banking; Entertainment; and Utilities.
|%Too High||%About Right||%Too Low||Index|
*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.
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.
The Non-Manufacturing ISM Reports On Business® is based on data compiled from monthly replies to questions asked of more than 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 Reports 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 Reports 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 Reports 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 Reports On Business® featuring the November 2005 data will be released at 10:00 a.m. (ET) on December 5, 2005.