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December 2006 Non-Manufacturing ISM Report On Business®

FOR RELEASE: January 4, 2007

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


Business Activity at 57.1%

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 2006.


New Orders Index at 54.4%
Employment Index at 53.3%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased at a slower rate in December 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 45th consecutive month in December," Nieves said. He added, "Business Activity increased at a slower rate in December than in November. Employment, Inventory, Exports and Imports all increased at a faster rate. The Prices Index increased 3.5 percentage points this month to 59.1 percent. Nine of 18 non-manufacturing industries reported increased activity in December. Members' comments in December are generally positive concerning current business conditions. The overall indication in December is continued economic growth in the non-manufacturing sector, but at a slower pace than in November."

TOP PERFORMING INDUSTRIES

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

WHAT RESPONDENTS ARE SAYING ...
  • "Business activity remains strong and is on the upturn." (Finance & Insurance)
  • "Housing sales slowing, affecting all areas of business." (Construction)
  • "The economy is starting to slow a little bit." (Professional, Scientific & Technical Services)
  • "Market remains stable." (Information)
  • "Business is steady, some seasonal increases." (Wholesale Trade)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
DECEMBER 2006
  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
Business Activity/Production 57.1 58.9 -1.8 Increasing Slower 45 51.8 48.5 +3.3
New Orders 54.4 57.1 -2.7 Increasing Slower 45 52.1 48.7 +3.4
Employment 53.3 51.6 +1.7 Increasing Faster 29 49.7 49.2 +0.5
Supplier Deliveries 51.0 50.0 +1.0 Slowing From Unchanged 1 53.4 52.8 +0.6
Inventories 53.5 51.5 +2.0 Increasing Faster 14 48.4 49.7 -1.3
Prices 59.1 55.6 +3.5 Increasing Faster 57 47.5 53.5 -6.0
Backlog of Orders 48.0 54.5 -6.5 Contracting From Growing 1 45.0 46.5 -1.5
New Export Orders 61.5 58.5 +3.0 Increasing Faster 18 54.3 56.9 -2.6
Imports 62.0 59.5 +2.5 Increasing Faster 11 55.5 56.5 -1.0
Inventory Sentiment 63.5 57.0 +6.5 "Too High" Faster 115 N/A N/A N/A
Customers' Inventories N/A N/A N/A       50.5 50.5 0.0

* 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.


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

Commodities Up in Price

Contractors; Corn (3); #1 Diesel Fuel; #2 Diesel Fuel; Fuel* (3); Gasoline (2); Hotel Costs (7); Labor -Skilled; Metal Products; Natural Gas; Paper (35); Plumbing Products; Poly Film/Products*; Soy Oil (3); and Steel* (2).

Commodities Down in Price

Beef; Fuel* (4); Plastics; Poly Film/Products*; and Steel* (2).

Commodities in Short Supply

Procurement Labor; Steel; and Steel Products.

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

* Reported as both up and down in price.



DECEMBER 2006 NON-MANUFACTURING INDEX SUMMARIES


Business Activity

ISM's Non-Manufacturing Business Activity Index in December registered 57.1 percent compared to the 58.9 percent registered in November, indicating a slower rate of growth in business activity in December. The implication is that non-manufacturing business activity is continuing to increase for the 45th consecutive month, but at a slower rate. This month, nine industries reported increased business activity, six reported decreased activity, and three indicated unchanged activity compared to November.

The industries reporting growth of business activity in December are: Real Estate, Rental & Leasing; Finance & Insurance; Utilities; Wholesale Trade; Accommodation & Food Services; Educational Services; Information; Health Care & Social Assistance; and Professional, Scientific & Technical Services. The six industries reporting contraction of business activity in December are: Mining; Other Services*; Management of Companies & Support Services; Construction; Transportation & Warehousing; and Public Administration.


Business Activity
%
Higher
%
Same
%
Lower

Index
December 2006 26 55 19 57.1
November 2006 32 53 15 58.9
October 2006 31 50 19 57.1
September 2006 25 56 19 52.9


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Dec 2006 57.1   Jun 2006 57.0
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
Average for 12 months – 57.9
High – 63.0
Low – 52.9

New Orders

ISM's Non-Manufacturing New Orders Index decreased to 54.4 percent in December from the 57.1 percent registered in November. This indicates continued expansion of new orders, but at a slower rate than in November. Comments from members include: "Slight reduction in activity due to seasonal impact"; "Budget constraints of customers"; and "Fewer orders."

Industries reporting growth of new orders in December are: Accommodation & Food Services; Finance & Insurance; Health Care & Social Assistance; Information; Utilities; Professional, Scientific & Technical Services; Retail Trade; and Wholesale Trade. The industries reporting contraction of new orders in December are: Mining; Other Services*; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Public Administration; Transportation & Warehousing; and Construction.


New Orders
%
Higher
%
Same
%
Lower

Index
December 2006 24 56 20 54.4
November 2006 29 55 16 57.1
October 2006 26 56 18 56.5
September 2006 27 57 16 57.2

Employment

Employment activity in the non-manufacturing sector increased at a slightly faster rate in December compared to November. This was the 29th consecutive monthly increase in non-manufacturing employment. ISM's Non-Manufacturing Employment Index for December is 53.3 percent, an increase of 1.7 percentage points from the 51.6 percent reported in November. Ten industries reported increased employment, six reported a decrease, and two indicated employment is unchanged from November. Comments from respondents include: "Targeted layoffs"; "More job awards"; and "Backlog of unfilled positions."

The industries reporting growth in employment in December are: Transportation & Warehousing; Real Estate, Rental & Leasing; Information; Utilities; Retail Trade; Educational Services; Accommodation & Food Services; Professional, Scientific & Technical Services; Finance & Insurance; and Public Administration. The six industries reporting a reduction in employment in December are: Mining; Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Construction; Health Care & Social Assistance; and Wholesale Trade.


Employment
%
Higher
%
Same
%
Lower

Index
December 2006 17 71 12 53.3
November 2006 18 68 14 51.6
October 2006 14 72 14 51.0
September 2006 17 69 14 53.6

Supplier Deliveries

In December, the delivery performance of suppliers to non-manufacturing organizations was slower than in November. The index registered 51 percent, 1 percentage point higher than in November. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in December include: "Slightly slower due to increased demand" and "Competition with holiday traffic."

The industries reporting slowing in supplier deliveries in December are: Utilities; Management of Companies & Support Services; Accommodation & Food Services; Health Care & Social Assistance; Wholesale Trade; Professional, Scientific & Technical Services; and Public Administration. The four industries reporting faster supplier deliveries in December are: Other Services*; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; and Educational Services.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
December 2006 10 82 8 51.0
November 2006 6 88 6 50.0
October 2006 13 83 4 54.5
September 2006 12 84 4 54.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 53.5 percent in December, an increase of 2 percentage points compared to November. This is the 14th consecutive month of reported increases in non-manufacturing inventories. Of the total respondents in December, 34 percent indicated they do not have inventories or do not measure them. Comments from members include: "Increased materials to support new projects" and "Increasing inventory items in support of internal operations."

The industries reporting increases in inventories in December are: Retail Trade; Utilities; Accommodation & Food Services; Information; Construction; and Wholesale Trade. The industries reporting decreases in inventories in December are: Other Services*; Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Public Administration; Health Care & Social Assistance; and Finance & Insurance.


Inventories
%
Higher
%
Same
%
Lower

Index
December 2006 25 57 18 53.5
November 2006 25 53 22 51.5
October 2006 24 58 18 53.0
September 2006 22 57 21 50.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in December for the 57th consecutive month. ISM's Non-Manufacturing Prices Index for December is 59.1 percent, 3.5 percentage points higher than November's index of 55.6 percent. In December, the percentage of respondents reporting higher prices decreased by 1 percentage point to 20 percent as compared to November. The percentage indicating no change increased from 65 percent in November to 71 percent in December. The percentage of respondents noting lower prices decreased from 14 percent in November to 9 percent in December.

The industries reporting an increase in prices paid in December are: Other Services*; Utilities; Educational Services; Professional, Scientific & Technical Services; Retail Trade; Finance & Insurance; Wholesale Trade; and Public Administration. The two industries reporting a decrease in prices in December are: Construction and Accommodation & Food Services.


Prices
%
Higher
%
Same
%
Lower

Index
December 2006 20 71 9 59.1
November 2006 21 65 14 55.6
October 2006 21 63 16 51.9
September 2006 26 61 13 56.7

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index registered 48 percent in December, 6.5 percentage points lower than the 54.5 percent reported in November. This indicates that order backlogs are contracting for the first time since August. Of the total respondents in December, 46 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments include: "Improved shipping causing backlog to decrease" and "Push to clear by year end."

The industries reporting an increase in order backlogs in December are: Information; Educational Services; Retail Trade; and Finance & Insurance. The six industries reporting a decrease in order backlogs in December are: Professional, Scientific & Technical Services; Other Services*; Health Care & Social Assistance; Construction; Public Administration; and Wholesale Trade.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
December 2006 13 70 17 48.0
November 2006 25 59 16 54.5
October 2006 22 59 19 51.5
September 2006 22 62 16 53.0

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 18th consecutive month in December. The December index marks 40 of the past 41 months that the index has exhibited growth. The New Export Orders Index for December is 61.5 percent, compared to November's index of 58.5 percent. Of the total respondents in December, 72 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 December are: Arts, Entertainment & Recreation; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Information; Wholesale Trade; Finance & Insurance; and Retail Trade. The two industries reporting a decrease in new export orders in December are: Public Administration; and Professional, Scientific & Technical Services.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
December 2006 32 59 9 61.5
November 2006 30 57 13 58.5
October 2006 35 57 8 63.5
September 2006 26 66 8 59.0

Imports

In December, the ISM Non-Manufacturing Imports Index registered 62 percent, 2.5 percentage points higher than November's index of 59.5 percent, indicating that use of imports increased in December for the 11th consecutive month, and at a faster rate than in November. In December, 66 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 December are: Educational Services; Information; Retail Trade; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; and Wholesale Trade. The two industries reporting a decrease in imports for the month of December are: Public Administration and Transportation & Warehousing.


Imports
%
Higher
%
Same
%
Lower

Index
December 2006 30 64 6 62.0
November 2006 28 63 9 59.5
October 2006 25 65 10 57.5
September 2006 21 68 11 55.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in December registered 63.5 percent, 6.5 percentage points higher than the 57 percent reported in November. This indicates that non-manufacturing purchasing and supply executives feel more discomfort with current levels of inventory in December than they did during November. In December, 34 percent of respondents felt their inventories were too high, 7 percent indicated their inventories were too low, and 59 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in December are: Other Services*; Construction; Wholesale Trade; Retail Trade; Arts, Entertainment & Recreation; Information; Public Administration; Transportation & Warehousing; Accommodation & Food Services; Utilities; and Finance & Insurance. The two industries reporting that their inventories are too low are: Management of Companies & Support Services; and Professional, Scientific & Technical Services.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
December 2006 34 59 7 63.5
November 2006 24 66 10 57.0
October 2006 33 63 4 64.5
September 2006 32 63 5 63.5

*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 January 2007 data will be released at 10:00 a.m. (ET) on Monday, February 5, 2007.


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