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April 2007 Non-Manufacturing ISM Report On Business®

FOR RELEASE: May 3, 2007


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


Business Activity at 56%

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 2007.


New Orders Index at 55.5%
Employment Index at 51.9%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased at a faster rate in April 2007, 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 49th consecutive month in April," Nieves said. He added, "Business Activity, New Orders and Employment increased at a faster rate in April than in March. The Prices Index increased slightly this month to 63.5 percent. Thirteen non-manufacturing industries reported increased activity in April. Members' comments in April are mixed about business conditions. There is continued concern with fuel and energy costs. The overall indication in April is continued economic growth in the non-manufacturing sector at a faster pace than in March."

TOP PERFORMING INDUSTRIES

The 13 industries reporting growth in April — listed in order — are: Arts, Entertainment & Recreation; Accommodation & Food Services; Transportation & Warehousing; Utilities; Information; Public Administration; Other Services*; Retail Trade; Real Estate, Rental & Leasing; Finance & Insurance; Construction; Educational Services; and Health Care & Social Assistance. The two industries reporting decreased activity from March to April are: Wholesale Trade; and Professional, Scientific & Technical Services.

WHAT RESPONDENTS ARE SAYING ...
  • "Progressive improvement in the business cycle." (Transportation & Warehousing)
  • "We are showing signs of recovery from bad news. Transactions are increasing faster than our normal seasonal increase." (Accommodation & Food Services)
  • "Concerned about the rapid increase in energy cost." (Professional, Scientific & Technical Services)
  • "The level of business is maintaining an even level at this time. Capital projects are ramping upwards." (Educational Services)
  • "Sales in the first three months of the year are slower than expected while pressure to lower prices is increasing." (Wholesale Trade)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
APRIL 2007
  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 56.0 52.4 +3.6 Growing Faster 49 57.3 53.0 +4.3
New Orders 55.5 53.8 +1.7 Growing Faster 49 58.5 51.6 +6.9
Employment 51.9 50.8 +1.1 Growing Faster 33 53.1 48.7 +4.4
Supplier Deliveries 51.0 50.0 +1.0 Slowing From Unchanged 1 50.2 51.3 -1.1
Inventories 52.0 52.0 0.0 Growing Same 3 46.3 47.5 -1.2
Prices 63.5 63.3 +0.2 Increasing Faster 47 73.0 65.5 +7.5
Backlog of Orders 50.0 52.5 -2.5 Unchanged From Growing 1 54.5 47.0 +7.5
New Export Orders 55.5 48.5 +7.0 Growing From Contracting 1 57.0 55.5 +1.5
Imports 52.5 50.0 +2.5 Growing From Unchanged 1 58.0 57.5 +0.5
Inventory Sentiment 60.5 63.0 -2.5 "Too High" Slower 119 N/A N/A N/A
Customers' Inventories   N/A N/A       47.0 48.0 -1.0

* 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 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

Airfare (2); Aluminum; Cardboard; Construction Services; Copper Wire; Copy Paper; Electricity (3); #1 Diesel Fuel (2); #2 Diesel Fuel (2); Freight/Shipping (3); Fuel (3); Fuel Surcharges; Gasoline (6); Gasoline Related; Hotel Costs (11); Labor; LDPE Films; Nickel Material; Office Furniture; Paper (39); Paper Products; Petroleum; Petroleum Products; Stainless Steel Products; and Transportation.

Commodities Down in Price

Lumber — Pine, Spruce and Treated; and Computer Equipment.

Commodities in Short Supply

Construction Services/Contractors (2); Purchasing and Supply Professionals; and Tires.

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



APRIL 2007 NON-MANUFACTURING INDEX SUMMARIES



Business Activity

ISM's Non-Manufacturing Business Activity Index in April registered 56 percent compared to the 52.4 percent registered in March, indicating a faster rate of growth in business activity in April. The implication is that non-manufacturing business activity is continuing to increase for the 49th consecutive month. Thirteen industries reported increased business activity, and two reported decreased activity for the month of April.

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


Business Activity
%
Higher
%
Same
%
Lower

Index
April 2007 37 48 15 56.0
March 2007 30 52 18 52.4
February 2007 27 53 20 54.3
January 2007 30 45 25 59.0


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Apr 2007 56.0   Oct 2006 57.4
Mar 2007 52.4   Sep 2006 54.6
Feb 2007 54.3   Aug 2006 56.9
Jan 2007 59.0   Jul 2006 55.7
Dec 2006 56.7   Jun 2006 56.9
Nov 2006 58.3   May 2006 59.2
Average for 12 months — 56.5
High — 59.2
Low — 52.4

New Orders

ISM's Non-Manufacturing New Orders Index increased to 55.5 percent in April from the 53.8 percent registered in March. This indicates continued expansion of new orders at a faster rate than in March. Comments from members include: "Some of our new markets are picking up;" and "Increased sales, proposal and prospect activity."

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


New Orders
%
Higher
%
Same
%
Lower

Index
April 2007 33 53 14 55.5
March 2007 31 48 21 53.8
February 2007 27 55 18 54.8
January 2007 27 51 22 55.4

Employment

Employment activity in the non-manufacturing sector increased at a faster rate in April compared to March. This was the 33rd consecutive monthly increase in non-manufacturing employment. ISM's Non-Manufacturing Employment Index for April is 51.9 percent, a 1.1 percentage point increase from the 50.8 percent reported in March. Nine industries reported increased employment, five reported a decrease, and four indicated employment is unchanged from March. Comments from respondents include: "Planned staff reductions"; "Expect more orders"; and "Continued growth of business."

The industries reporting growth in employment in April are: Arts, Entertainment & Recreation; Other Services*; Retail Trade; Transportation & Warehousing; Health Care & Social Assistance; Construction; Finance & Insurance; Public Administration; and Information. The five industries reporting a reduction in employment in April are: Mining; Management of Companies & Support Services; Wholesale Trade; Professional, Scientific & Technical Services; and Utilities.


Employment
%
Higher
%
Same
%
Lower

Index
April 2007 19 69 12 51.9
March 2007 17 69 14 50.8
February 2007 18 65 17 52.2
January 2007 15 69 16 51.7

Supplier Deliveries

In April, the delivery performance of suppliers to non-manufacturing organizations was slower than in March. The index registered 51 percent, 1 percentage point higher than in March, indicating a slowing of supplier deliveries from an unchanged rate. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in April include: "OEMs behind on manufacturing"; "Availability of trucks"; and "Supply exceeds demand."

The industries reporting slowing in supplier deliveries in April are: Utilities; Arts, Entertainment & Recreation; Other Services*; Information; and Health Care & Social Assistance. The industries reporting faster supplier deliveries in April are: Accommodation & Food Services; Professional, Scientific & Technical Services; Public Administration; and Wholesale Trade.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
April 2007 9 84 7 51.0
March 2007 8 84 8 50.0
February 2007 10 85 5 52.5
January 2007 15 77 8 53.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 52 percent in April, indicating that inventories are growing at the same rate as March. Inventories are expanding for the third consecutive month after one month of contraction. Of the total respondents in April, 34 percent indicated they do not have inventories or do not measure them. Comments from members include: "Still in a reducing mode"; "Emphasis on reducing inventory at our customer as well as in our distribution center"; and "End of busy season. Inventories of products purchased for year-end have arrived."

The industries reporting increases in inventories in April are: Arts, Entertainment & Recreation; Other Services*; Finance & Insurance; Professional, Scientific & Technical Services; Information; and Retail Trade. The industries reporting decreases in inventories in April are: Agriculture, Forestry, Fishing & Hunting; Utilities; Wholesale Trade; and Transportation & Warehousing.


Inventories
%
Higher
%
Same
%
Lower

Index
April 2007 17 70 13 52.0
March 2007 24 56 20 52.0
February 2007 23 55 22 50.5
January 2007 18 58 24 47.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in April for the 47th consecutive month. ISM's Non-Manufacturing Prices Index for April is 63.5 percent, 0.2 percentage point higher than March's index of 63.3 percent. In April, the percentage of respondents reporting higher prices increased by 4 percentage points to 42 percent as compared to March. The percentage indicating no change decreased from 58 percent in March to 54 percent in April. The percentage of respondents noting prices decreased remained the same at 4 percent in April.

The industries reporting an increase in prices paid in April are: Mining; Educational Services; Real Estate, Rental & Leasing; Management of Companies & Support Services; Accommodation & Food Services; Utilities; Arts, Entertainment & Recreation; Public Administration; Wholesale Trade; Professional, Scientific & Technical Services; Health Care & Social Assistance; Retail Trade; Construction; Finance & Insurance; and Information. No industry reported a decrease in prices in April.


Prices
%
Higher
%
Same
%
Lower

Index
April 2007 42 54 4 63.5
March 2007 38 58 4 63.3
February 2007 17 74 9 53.8
January 2007 23 62 15 55.2

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index registered 50 percent in April, 2.5 percentage points lower than the 52.5 percent reported in March. Of the total respondents in April, 43 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments include: "Due to shipping of orders, our backlog is beginning to reduce"; "Working off backlog"; and "Increased productivity."

The industries reporting an increase in order backlogs in April are: Transportation & Warehousing; Arts, Entertainment & Recreation; Construction; Information; Management of Companies & Support Services; Other Services*; Public Administration; and Finance & Insurance. The industries reporting a decrease in order backlogs in April are: Professional, Scientific & Technical Services; Wholesale Trade; Retail Trade; and Health Care & Social Assistance.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
April 2007 20 60 20 50.0
March 2007 20 65 15 52.5
February 2007 15 64 21 47.0
January 2007 17 64 19 49.0

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 in April increased after a month of contraction. The New Export Orders Index for April is 55.5 percent, compared to March's index of 48.5 percent. Of the total respondents in April, 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 April are: Mining; Management of Companies & Support Services; Information; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Finance & Insurance; and Wholesale Trade. The industries reporting a decrease in new export orders in April are: Public Administration and Retail Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
April 2007 23 65 12 55.5
March 2007 18 61 21 48.5
February 2007 25 68 7 59.0
January 2007 29 52 19 55.0

Imports

In April, the ISM Non-Manufacturing Imports Index registered 52.5 percent, 2.5 percentage points higher than March's index of 50 percent, indicating that use of imports increased in April when compared to March. In April, 65 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 April are: Construction; Agriculture, Forestry, Fishing & Hunting; Utilities; Management of Companies & Support Services; Accommodation & Food Services; Information; and Retail Trade. The industries reporting a decrease in imports for the month of April are: Public Administration; Arts, Entertainment & Recreation; and Wholesale Trade.


Imports
%
Higher
%
Same
%
Lower

Index
April 2007 18 69 13 52.5
March 2007 13 74 13 50.0
February 2007 18 72 10 54.0
January 2007 14 76 10 52.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in April registered 60.5 percent, 2.5 percentage points lower than the 63 percent reported in March. This indicates that non-manufacturing purchasing and supply executives feel less 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, 6 percent indicated their inventories were too low, and 67 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in April are: Other Services*; Professional, Scientific & Technical Services; Transportation & Warehousing; Finance & Insurance; Real Estate, Rental & Leasing; Wholesale Trade; Construction; Management of Companies & Support Services; and Accommodation & Food Services. The industries reporting that their inventories are too low are: Utilities; Public Administration; and Retail Trade.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
April 2007 27 67 6 60.5
March 2007 32 62 6 63.0
February 2007 30 63 7 61.5
January 2007 35 61 4 65.5

*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 May 2007 data will be released at 10:00 a.m. (ET) on Tuesday, June 5, 2007.



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