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November 2006 Non-Manufacturing ISM Report On Business®

FOR RELEASE: December 5, 2006

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


Business Activity at 58.9%

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 November 2006.


New Orders Index at 57.1%
Employment Index at 51.6%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased at a faster rate in November 2006, 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 Hotels Corporation. "Non-manufacturing business activity increased for the 44th consecutive month in November," Nieves said. He added, "Business Activity increased at a faster rate in November than in October. New Orders, Employment, Backlog of Orders and Imports also increased at a faster rate. The Prices Index increased 3.7 percentage points this month to 55.6 percent. Eleven of 18 non-manufacturing industries reported increased activity in November. Members' comments in November are mostly positive concerning current business conditions. The overall indication in November is continued economic growth in the non-manufacturing sector at a faster pace than in October."

TOP PERFORMING INDUSTRIES

The eleven industries reporting growth in November — listed in order — are: Wholesale Trade; Information; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Arts, Entertainment & Recreation; Health Care & Social Assistance; Real Estate, Rental & Leasing; Other Services*; Utilities; and Professional, Scientific & Technical Services. The three industries reporting activity the same as last month are: Mining; Transportation & Warehousing; and Finance & Insurance. The four industries reporting decreased activity from October to November are: Educational Services; Accommodation & Food Services; Construction; and Public Administration.

WHAT RESPONDENTS ARE SAYING ...
  • "Business still strong." (Utilities)
  • "New job orders and new and repeat job awards have increased in October and November." (Professional, Scientific & Technical Services)
  • "Sustained lower energy costs driving customer commitment and increasing operational objectives." (Accommodation & Food Services)
  • "Generally improving outlook about the economy." (Educational Services)
  • "The market has not changed in the past month. Sales are slow and order cancellations are still high. The forecast for the next 30 - 60 days is the same." (Construction)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
NOVEMBER 2006
  Non-Manufacturing Manufacturing
Index Series
Index
Nov
Series
Index
Oct
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Nov
Series
Index
Oct
Percent
Point
Change
Business Activity/Production 58.9 57.1 +1.8 Increasing Faster 44 48.5 51.9 -3.4
New Orders 57.1 56.5 +0.6 Increasing Faster 44 48.7 52.1 -3.4
Employment 51.6 51.0 +0.6 Increasing Faster 28 49.2 50.8 -1.6
Supplier Deliveries 50.0 54.5 -4.5 Unchanged From Growing 1 52.8 50.2 +2.6
Inventories 51.5 53.0 -1.5 Increasing Slower 13 49.7 49.4 +0.3
Prices 55.6 51.9 +3.7 Increasing Faster 56 53.5 47.0 +6.5
Backlog of Orders 54.5 51.5 +3.0 Growing Faster 3 46.5 44.5 +2.0
New Export Orders 58.5 63.5 -5.0 Increasing Slower 17 56.9 57.8 -0.9
Imports 59.5 57.5 +2.0 Increasing Faster 10 56.5 57.0 -0.5
Inventory Sentiment 57.0 64.5 -7.5 "Too High" Slower 114 N/A N/A N/A
Customers' Inventories N/A N/A N/A       50.5 52.0 -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

Airfare; Cleaning Supplies; Construction (2); Corn (2); Electricity; Fuel* (2); Gasoline*; Hotel Costs (6); Lumber — Pine, Plywood and Treated*; Office Products & Supplies* (3); Paper (34); Paper Products (10); Soy Oil (2); Soybean Meal (2); Stainless Steel (3); Steel*; and Steel Products* (2).

Commodities Down in Price

Chicken; Copy Paper; Diesel Fuel (3); # 2 Diesel Fuel (3); Fuel* (3); Gasoline* (3); Lumber — Spruce* (6); Office Products & Supplies*; Overnight Shipping; Poly Bags; Polypropylene; Pork; PVC; Steel*; and Steel Products*.

Commodities in Short Supply

Labor; Polypropylene; and Vaccines (3).

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

* Reported as both up and down in price.



NOVEMBER 2006 NON-MANUFACTURING INDEX SUMMARIES


Business Activity

ISM's Non-Manufacturing Business Activity Index in November registered 58.9 percent compared to the 57.1 percent registered in October, indicating a faster rate of growth in business activity in November. The implication is that non-manufacturing business activity is continuing to increase for the 44th consecutive month and at a faster rate. This month, 11 industries reported increased business activity, four reported decreased activity, and three indicated unchanged activity compared to October.

The industries reporting growth of business activity in November are: Wholesale Trade; Information; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Arts, Entertainment & Recreation; Health Care & Social Assistance; Real Estate, Rental & Leasing; Other Services*; Utilities; and Professional, Scientific & Technical Services. The four industries reporting contraction of business activity in November are: Educational Services; Accommodation & Food Services; Construction; and Public Administration.


Business Activity
%
Higher
%
Same
%
Lower

Index
November 2006 32 53 15 58.9
October 2006 31 50 19 57.1
September 2006 25 56 19 52.9
August 2006 27 56 17 57.0


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Nov 2006 58.9   May 2006 60.1
Oct 2006 57.1   Apr 2006 63.0
Sep 2006 52.9   Mar 2006 60.5
Aug 2006 57.0   Feb 2006 60.1
Jul 2006 54.8   Jan 2006 56.8
Jun 2006 57.0   Dec 2005 61.0
Average for 12 months – 58.3
High – 63.0
Low – 52.9

New Orders

ISM's Non-Manufacturing New Orders Index increased to 57.1 percent in November from the 56.5 percent registered in October. This indicates continued expansion of new orders at a faster rate than in October. Comments from members include: "Typically busy time of year" and "Low unemployment rate and higher demand for supply chain and contract administrators."

Industries reporting growth of new orders in November are: Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Health Care & Social Assistance; Information; Management of Companies & Support Services; Arts, Entertainment & Recreation; Retail Trade; Other Services*; Professional, Scientific & Technical Services; Finance & Insurance; and Accommodation & Food Services. The industries reporting contraction of new orders in November are: Educational Services; Construction; Public Administration; and Real Estate, Rental & Leasing.


New Orders
%
Higher
%
Same
%
Lower

Index
November 2006 29 55 16 57.1
October 2006 26 56 18 56.5
September 2006 27 57 16 57.2
August 2006 22 60 18 52.1

Employment

Employment activity in the non-manufacturing sector increased at a slightly faster rate in November compared to October. This was the 28th consecutive monthly increase in non-manufacturing employment. ISM's Non-Manufacturing Employment Index for November is 51.6 percent, an increase of 0.6 percentage point from the 51 percent reported in October. Seven industries reported increased employment, six reported a decrease, and five indicated employment is unchanged from October. Comments from respondents include: "Increasing skilled employees for anticipated business increase in 2007" and "More labor needed for capital projects."

The industries reporting growth in employment in November are: Retail Trade; Other Services*; Utilities; Professional, Scientific & Technical Services; Health Care & Social Assistance; Wholesale Trade; and Finance & Insurance. The six industries reporting a reduction in employment in November are: Mining; Management of Companies & Support Services; Information; Construction; Public Administration; and Accommodation & Food Services.


Employment
%
Higher
%
Same
%
Lower

Index
November 2006 18 68 14 51.6
October 2006 14 72 14 51.0
September 2006 17 69 14 53.6
August 2006 15 72 13 51.4

Supplier Deliveries

In November, the delivery performance of suppliers to non-manufacturing organizations remained the same as in October. The index registered 50 percent, 4.5 percentage points lower than in October. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in November include: "Slow rail delivery" and "OEM shortages."

The industries reporting slowing in supplier deliveries in November are: Utilities; Educational Services; Other Services*; Information; and Management of Companies & Support Services. The three industries reporting faster supplier deliveries in November are: Transportation & Warehousing; Retail Trade; and Wholesale Trade.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
November 2006 6 88 6 50.0
October 2006 13 83 4 54.5
September 2006 12 84 4 54.0
August 2006 13 81 6 53.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 51.5 percent in November, a decrease of 1.5 percentage points compared to October. This is the 13th consecutive month of reported increases in non-manufacturing inventories. Of the total respondents in November, 34 percent indicated they do not have inventories or do not measure them. Comments from members include: "Reducing inventory to free up capital" and "Program implemented to increase cycle times."

The industries reporting increases in inventories in November are: Information; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Accommodation & Food Services; Retail Trade; and Public Administration. The industries reporting decreases in inventories in November are: Arts, Entertainment & Recreation; Health Care & Social Assistance; Finance & Insurance; Utilities; Management of Companies & Support Services; Construction; Wholesale Trade; and Real Estate, Rental & Leasing.


Inventories
%
Higher
%
Same
%
Lower

Index
November 2006 25 53 22 51.5
October 2006 24 58 18 53.0
September 2006 22 57 21 50.5
August 2006 20 63 17 51.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in November for the 56th consecutive month. ISM's Non-Manufacturing Prices Index for November is 55.6 percent, 3.7 percentage points higher than October's index of 51.9 percent. In November, the percentage of respondents reporting higher prices remained the same as in October at 21 percent. The percentage indicating no change increased from 63 percent in October to 65 percent in November. The percentage of respondents noting lower prices decreased from 16 percent in October to 14 percent in November.

The industries reporting an increase in prices paid in November are: Mining; Utilities; Educational Services; Arts, Entertainment & Recreation; Accommodation & Food Services; Retail Trade; Public Administration; Health Care & Social Assistance; Wholesale Trade; and Professional, Scientific & Technical Services. The seven industries reporting a decrease in prices in November are: Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Information; Construction; Transportation & Warehousing; Management of Companies & Support Services; and Finance & Insurance.


Prices
%
Higher
%
Same
%
Lower

Index
November 2006 21 65 14 55.6
October 2006 21 63 16 51.9
September 2006 26 61 13 56.7
August 2006 43 54 3 72.4

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index registered 54.5 percent in November, 3 percentage points higher than the 51.5 percent reported in October. This indicates that order backlogs are once again increasing for the third consecutive month after contracting in August. Of the total respondents in November, 42 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments on backlogs of orders include: "Budget constraints increasing", "Material delivery slowdown" and "Christmas demand is backing up some deliveries."

The industries reporting an increase in order backlogs in November are: Arts, Entertainment & Recreation; Other Services*; Agriculture, Forestry, Fishing & Hunting; Utilities; Real Estate, Rental & Leasing; Accommodation & Food Services; Wholesale Trade; Retail Trade; and Construction. The six industries reporting a decrease in order backlogs in November are: Transportation & Warehousing; Information; Educational Services; Public Administration; Professional, Scientific & Technical Services; and Finance & Insurance.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
November 2006 25 59 16 54.5
October 2006 22 59 19 51.5
September 2006 22 62 16 53.0
August 2006 17 65 18 49.5

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 17th consecutive month in November. The November index marks 39 of the past 40 months that the index has exhibited growth. The New Export Orders Index for November is 58.5 percent, compared to October's index of 63.5 percent. Of the total respondents in November, 69 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The industries reporting an increase in new export orders in November are: Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Finance & Insurance; Management of Companies & Support Services; Information; Retail Trade; Wholesale Trade; and Professional, Scientific & Technical Services. The three industries reporting a decrease in new export orders in November are: Educational Services; Real Estate, Rental & Leasing; and Accommodation & Food Services.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
November 2006 30 57 13 58.5
October 2006 35 57 8 63.5
September 2006 26 66 8 59.0
August 2006 20 66 14 53.0

Imports

In November, the ISM Non-Manufacturing Imports Index registered 59.5 percent, 2 percentage points higher than October's index of 57.5 percent, indicating that use of imports increased in November for the 10th consecutive month, and at a faster rate than in October. In November, 61 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 November are: Transportation & Warehousing; Utilities; Information; Real Estate, Rental & Leasing; Management of Companies & Support Services; Retail Trade; Wholesale Trade; and Accommodation & Food Services. The two industries reporting a decrease in imports for the month of November are: Arts, Entertainment & Recreation; and Finance & Insurance.


Imports
%
Higher
%
Same
%
Lower

Index
November 2006 28 63 9 59.5
October 2006 25 65 10 57.5
September 2006 21 68 11 55.0
August 2006 22 76 2 60.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in November registered 57 percent, 7.5 percentage points lower than the 64.5 percent reported in October. This indicates that non-manufacturing purchasing and supply executives feel a lesser degree of discomfort with current levels of inventory in November than they did during October. In November, 24 percent of respondents felt their inventories were too high, 10 percent indicated their inventories were too low, and 66 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in November are: Other Services*; Wholesale Trade; Information; Construction; Accommodation & Food Services; and Retail Trade. The three industries reporting that their inventories are too low are: Utilities; Management of Companies & Support Services; and Public Administration.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
November 2006 24 66 10 57.0
October 2006 33 63 4 64.5
September 2006 32 63 5 63.5
August 2006 28 62 10 59.0

*Other Services include:
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.

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; Other Services*; and Public Administration.

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.

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 December 2006 data will be released at 10:00 a.m. (ET) on Thursday, January 4, 2007.



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