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July 2007 Non-Manufacturing ISM Report On Business®

FOR RELEASE: August 3, 2007


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

Business Activity at 55.8%

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 July 2007.


New Orders Index at 52.8%
Employment Index at 51.7%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased at a slower rate in July 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 52nd consecutive month in July," Nieves said. He added, "Business Activity, New Orders and Employment increased at a slower rate in July than in June. The Business Activity Index registered 55.8 percent, a decrease of 4.9 percent. The New Orders Index decreased to 52.8 percent, and the Prices Index decreased to 61.3 percent in July, both indicating growth at a slower rate than in June. Nine non-manufacturing industries reported increased activity in July. Members' comments in July are mixed about business conditions. The overall indication in July is continued economic growth in the non-manufacturing sector, but at a slower pace than in June."

TOP PERFORMING INDUSTRIES
The nine industries reporting growth in July — listed in order — are: Finance & Insurance; Accommodation & Food Services; Transportation & Warehousing; Information; Construction; Public Administration; Educational Services; Retail Trade; and Wholesale Trade. The six industries reporting decreased activity from June to July are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Other Services*; Arts, Entertainment & Recreation; and Health Care & Social Assistance.
WHAT RESPONDENTS ARE SAYING ...
  • "Moderate level of economic activity." (Professional, Scientific & Technical Services)
  • "Business is mixed. Some divisions way ahead on pricing and volume, others way behind. Oil at $70 [a barrel] is a concern." (Agriculture, Forestry, Fishing & Hunting)
  • "Market competition is getting tougher, pricing from our suppliers has risen dramatically, and fuel costs are causing some customers to re-think their travel plans." (Real Estate, Rental & Leasing)
  • "Business is down." (Arts, Entertainment & Recreation)
  • "Large projects starting." (Construction)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
JULY 2007
  Non-Manufacturing Manufacturing
Index Series
Index
July
Series
Index
June
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
July
Series
Index
June
Percent
Point
Change
Business Activity/Production 55.8 60.7 -4.9 Growing Slower 52 55.6 62.9 -7.3
New Orders 52.8 56.9 -4.1 Growing Slower 52 57.5 60.3 -2.8
Employment 51.7 55.0 -3.3 Growing Slower 36 50.2 51.1 -0.9
Supplier Deliveries 51.5 50.5 +1.0 Slowing Faster 2 52.0 49.7 +2.3
Inventories 55.0 52.5 +2.5 Growing Faster 6 48.5 45.3 +3.2
Prices 61.3 65.5 -4.2 Increasing Slower 50 65.0 68.0 -3.0
Backlog of Orders 53.0 46.5 +6.5 Growing From Contracting 1 52.0 53.5 -1.5
New Export Orders 52.5 59.0 -6.5 Growing Slower 4 56.5 56.0 +0.5
Imports 54.5 57.5 -3.0 Growing Slower 4 54.5 54.5 0.0
Inventory Sentiment 65.0 60.5 +4.5 "Too High" Faster 122 N/A N/A N/A
Customers' Inventories N/A N/A N/A       51.0 47.0 +4.0

* 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; Building Materials (3); Car Rentals (3); Champagne; Cheese (2); Copper Fittings; #2 Diesel Fuel (5); Electricity (2); Fuel (6); Fuel Costs; Hotel Costs (14); Landscaping Services; Lumber — Pine, Plywood, Spruce and Treated; Milk; Office Furniture; Office Supplies; Paper — Cut Sheet; and Wine and Spirits.

Commodities Down in Price

Diesel Fuel (2) and Gasoline (2).

Commodities in Short Supply

Construction Services/Contractors (5); Contract Personnel; Purchasing and Supply Professionals; and Skilled Labor.

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



JULY 2007 NON-MANUFACTURING INDEX SUMMARIES



Business Activity

ISM's Non-Manufacturing Business Activity Index in July registered 55.8 percent compared to the 60.7 percent registered in June, indicating a slower rate of growth in business activity in July. The implication is that non-manufacturing business activity is continuing to increase for the 52nd consecutive month. Nine industries reported increased business activity, and six industries reported decreased activity for the month of July.

The industries reporting growth of business activity in July are: Finance & Insurance; Accommodation & Food Services; Transportation & Warehousing; Information; Construction; Public Administration; Educational Services; Retail Trade; and Wholesale Trade. The six industries reporting decreased activity from June to July are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Other Services*; Arts, Entertainment & Recreation; and Health Care & Social Assistance.


Business Activity
%
Higher
%
Same
%
Lower

Index
July 2007 30 52 18 55.8
June 2007 40 49 11 60.7
May 2007 39 46 15 59.7
April 2007 37 48 15 56.0


THE LAST 12 MONTHS
THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Jul 2007 55.8   Jan 2007 59.0
Jun 2007 60.7   Dec 2006 56.7
May 2007 59.7   Nov 2006 58.3
Apr 2007 56.0   Oct 2006 57.4
Mar 2007 52.4   Sep 2006 54.6
Feb 2007 54.3   Aug 2006 56.9
Average for 12 months — 56.8
High — 60.7
Low — 52.4

New Orders

ISM's Non-Manufacturing New Orders Index decreased to 52.8 percent in July from the 56.9 percent registered in June. This indicates continued expansion of new orders, but at a slower rate than in June. Comments from members include: "Fewer new job orders" and "Less patient visits."

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


New Orders
%
Higher
%
Same
%
Lower

Index
July 2007 25 57 18 52.8
June 2007 34 52 14 56.9
May 2007 33 54 13 57.4
April 2007 33 53 14 55.5

Employment

Employment activity in the non-manufacturing sector increased at a slower rate in July compared to June. This was the 36th consecutive monthly increase in non-manufacturing employment. ISM's Non-Manufacturing Employment Index for July is 51.7 percent, a 3.3 percentage point decrease from the 55 percent reported in June. Ten industries reported increased employment, six reported a decrease, and two indicated employment is unchanged from June. Comments from respondents include: "Natural attrition and hiring freezes"; "Reducing temps and not replacing some positions"; and "Retirements occur at above average levels from May through June each year."

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


Employment
%
Higher
%
Same
%
Lower

Index
July 2007 21 66 13 51.7
June 2007 24 67 9 55.0
May 2007 23 68 9 54.9
April 2007 19 69 12 51.9

Supplier Deliveries

In July, the delivery performance of suppliers to non-manufacturing organizations was slower than in June. The index registered 51.5 percent, 1 percentage point higher than in June. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in July are: Management of Companies & Support Services; Educational Services; Retail Trade; Professional, Scientific & Technical Services; Wholesale Trade; and Public Administration. The industries reporting faster supplier deliveries in July are: Accommodation & Food Services; Health Care & Social Assistance; and Information.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
July 2007 8 87 5 51.5
June 2007 8 85 7 50.5
May 2007 7 85 8 49.5
April 2007 9 84 7 51.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 55 percent in July, indicating that inventories are growing at a faster rate compared to June. Inventories are expanding for the sixth consecutive month after one month of contraction in January 2007. Of the total respondents in July, 29 percent indicated they do not have inventories or do not measure them. Comments from members include: "Stocking seasonal items for special events"; "We are increasing all of our inventory to be closer to our max levels as opposed to our minimum levels"; and "Past activity still drives purchase quantities."

The industries reporting increases in inventories in July are: Information; Construction; Transportation & Warehousing; Health Care & Social Assistance; Finance & Insurance; Professional, Scientific & Technical Services; and Retail Trade. The industries reporting decreases in inventories in July are: Other Services*; Accommodation & Food Services; Wholesale Trade; Arts, Entertainment & Recreation; Management of Companies & Support Services; and Real Estate, Rental & Leasing.


Inventories
%
Higher
%
Same
%
Lower

Index
July 2007 28 54 18 55.0
June 2007 21 63 16 52.5
May 2007 29 64 7 61.0
April 2007 17 70 13 52.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in July for the 50th consecutive month. ISM's Non-Manufacturing Prices Index for July is 61.3 percent, 4.2 percentage points lower than June's index of 65.5 percent. In July, the percentage of respondents reporting higher prices decreased by 6 percentage points to 29 percent as compared to June. The percentage indicating no change increased from 62 percent in June to 68 percent in July. The percentage of respondents noting lower prices remained the same at 3 percent in July.

The industries reporting an increase in prices paid in July are: Management of Companies & Support Services; Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Transportation & Warehousing; Information; Accommodation & Food Services; Retail Trade; Educational Services; Wholesale Trade; Construction; Finance & Insurance; Health Care & Social Assistance; and Utilities. No industry is reporting a decrease in prices in July.


Prices
%
Higher
%
Same
%
Lower

Index
July 2007 29 68 3 61.3
June 2007 35 62 3 65.5
May 2007 41 55 4 66.4
April 2007 42 54 4 63.5

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index registered 53 percent in July, 6.5 percentage points higher than the 46.5 percent reported in June. Of the total respondents in July, 43 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in July are: Real Estate, Rental & Leasing; Educational Services; Accommodation & Food Services; Public Administration; Construction; and Wholesale Trade. The industries reporting lower backlog of orders in July are: Management of Companies & Support Services; Information; and Health Care & Social Assistance.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
July 2007 14 78 8 53.0
June 2007 14 65 21 46.5
May 2007 13 70 17 48.0
April 2007 20 60 20 50.0

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 July increased for the fourth consecutive month after one month of contraction in March 2007. The New Export Orders Index for July is 52.5 percent, compared to June's index of 59 percent. Of the total respondents in July, 71 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 July are: Arts, Entertainment & Recreation; Accommodation & Food Services; Retail Trade; and Finance & Insurance. The three industries reporting a decrease in export orders are: Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; and Wholesale Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
July 2007 22 61 17 52.5
June 2007 26 66 8 59.0
May 2007 36 60 4 66.0
April 2007 23 65 12 55.5

Imports

In July, the ISM Non-Manufacturing Imports Index registered 54.5 percent, 3 percentage points lower than June's index of 57.5 percent, indicating that use of imports increased at a slower rate in July when compared to June. In July, 63 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 July are: Information; Finance & Insurance; Accommodation & Food Services; Retail Trade; and Health Care & Social Assistance. The three industries reporting a decrease in imports for the month of July are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; and Wholesale Trade.


Imports
%
Higher
%
Same
%
Lower

Index
July 2007 19 71 10 54.5
June 2007 24 67 9 57.5
May 2007 17 77 6 55.5
April 2007 18 69 13 52.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in July registered 65 percent, 4.5 percentage points higher than the 60.5 percent reported in June. This indicates that non-manufacturing purchasing and supply executives feel more discomfort with current levels of inventory in July than they did during June. In July, 35 percent of respondents felt their inventories were too high, 5 percent indicated their inventories were too low, and 60 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in July are: Other Services*; Utilities; Wholesale Trade; Transportation & Warehousing; Information; Finance & Insurance; Professional, Scientific & Technical Services; Management of Companies & Support Services; Public Administration; Health Care & Social Assistance; and Retail Trade. The one industry reporting that their inventories are too low is Construction.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
July 2007 35 60 5 65.0
June 2007 23 75 2 60.5
May 2007 26 70 4 61.0
April 2007 27 67 6 60.5

*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 August 2007 data will be released at 10:00 a.m. (ET) on Thursday, September 6, 2007.


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