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August 2007 Non-Manufacturing ISM Report On Business®

FOR RELEASE: September 6, 2007


Contact: Andrea Waas, APR
  ISM, Vice President
  Tempe, Arizona
  800/888-6276, Ext. 3009
  E-mail: awaas@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 August 2007.


New Orders Index at 57%
Employment Index at 47.9%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased at the same rate in August as in July, 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 53rd consecutive month in August," Nieves said. He added, "The Business Activity Index remained the same at 55.8 percent for the month of August. New Orders increased at a faster rate and Employment contracted in August. The New Orders Index increased to 57 percent, and the Prices Index decreased to 58.6 percent in August. Ten non-manufacturing industries reported increased activity in August. Members' comments in August are mixed about business conditions. The overall indication in August is continued economic growth in the non-manufacturing sector at the same pace as in July."

TOP PERFORMING INDUSTRIES

The 10 industries reporting growth in August — listed in order — are: Accommodation & Food Services; Real Estate, Rental & Leasing; Other Services*; Health Care & Social Assistance; Utilities; Public Administration; Professional, Scientific & Technical Services; Educational Services; Retail Trade; and Information. The five industries reporting decreased activity from July to August are: Management of Companies & Support Services; Arts, Entertainment & Recreation; Finance & Insurance; Wholesale Trade; and Construction.

WHAT RESPONDENTS ARE SAYING ...
  • "We continue to be cautious but optimistic. Customer sentiment, fuels and the general conditions in the markets continue to cause concern. However, we are planning for new and increased business levels and are buying to support what we anticipate to be a turn." (Retail Trade)
  • "With the residential construction sector struggling, commercial construction has filled the void with a robust performance." (Public Administration)
  • "We are getting mixed messages on the economy. Looks like tight credit is slowing business down." (Professional, Scientific & Technical Services)
  • "Financial market conditions turned negative." (Finance & Insurance)
  • "The general state of the home building sector is still very low with material costs fluctuating monthly. Sales volume is trending down with less traffic over prior month. Labor rates are declining with some companies closing their doors due to little to no new business." (Construction)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
AUGUST 2007
  Non-Manufacturing Manufacturing
Index Series
Index
August
Series
Index
July
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
August
Series
Index
July
Percent
Point
Change
Business Activity/Production 55.8 55.8 0.0 Growing Same 53 56.1 55.6 +0.5
New Orders 57.0 52.8 +4.2 Growing Faster 53 55.3 57.5 -2.2
Employment 47.9 51.7 -3.8 Contracting From Growing 1 51.3 50.2 +1.1
Supplier Deliveries 50.5 51.5 -1.0 Slowing Slower 3 50.0 52.0 -2.0
Inventories 57.0 55.0 +2.0 Growing Faster 7 45.4 48.5 -3.1
Prices 58.6 61.3 -2.7 Increasing Slower 51 63.0 65.0 -2.0
Backlog of Orders 50.0 53.0 -3.0 Unchanged From Growing 1 50.5 52.0 -1.5
New Export Orders 53.5 52.5 +1.0 Growing Faster 5 57.0 56.5 +0.5
Imports 55.0 54.5 +0.5 Growing Faster 5 52.5 54.5 -2.0
Inventory Sentiment 61.5 65.0 -3.5 "Too High" Slower 123 N/A N/A N/A
Customers' Inventories N/A N/A N/A       49.0 51.0 -2.0

* 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); Car Rentals (4); Cheese (3); Copper Wire; Fuel* (7); Hotel Costs (15); Milk (2); and Paper (2).

Commodities Down in Price

Fuel*; Gasoline (3); and Lumber — Pine, Plywood, Spruce & Treated.

Commodities in Short Supply

Nickel Products is the only commodity listed in short supply.

*Reported both Up and Down in price.

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



AUGUST 2007 NON-MANUFACTURING INDEX SUMMARIES



Business Activity

ISM's Non-Manufacturing Business Activity Index in August registered 55.8 percent, indicating the same rate of growth in business activity compared to July. The implication is that non-manufacturing business activity is continuing to increase for the 53rd consecutive month. Ten industries reported increased business activity, and five industries reported decreased activity for the month of August.

The industries reporting growth of business activity in August are: Accommodation & Food Services; Real Estate, Rental & Leasing; Other Services*; Health Care & Social Assistance; Utilities; Public Administration; Professional, Scientific & Technical Services; Educational Services; Retail Trade; and Information. The five industries reporting decreased activity from July to August are: Management of Companies & Support Services; Arts, Entertainment & Recreation; Finance & Insurance; Wholesale Trade; and Construction.


Business Activity
%
Higher
%
Same
%
Lower

Index
August 2007 27 54 19 55.8
July 2007 30 52 18 55.8
June 2007 40 49 11 60.7
May 2007 39 46 15 59.7


THE LAST 12 MONTHS
THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Aug 2007 55.8   Feb 2007 54.3
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
Average for 12 months — 56.7
High — 60.7
Low — 52.4

New Orders

ISM's Non-Manufacturing New Orders Index increased to 57 percent in August from the 52.8 percent registered in July. This indicates continued expansion of new orders and at a faster rate than in July. Comments from members include: "Increased proposal and prospect activity" and "New store demands."

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


New Orders
%
Higher
%
Same
%
Lower

Index
August 2007 27 57 16 57.0
July 2007 25 57 18 52.8
June 2007 34 52 14 56.9
May 2007 33 54 13 57.4

Employment

Employment activity in the non-manufacturing sector contracted in August. The last time the Employment Index contracted was in July 2004. ISM's Non-Manufacturing Employment Index for August is 47.9 percent, a 3.8 percentage point decrease from the 51.7 percent reported in July. Three industries reported increased employment, eight reported a decrease, and seven indicated employment is unchanged from July. Comments from respondents include: "Conservative outlook for future"; "Lower sales volume"; and "Reduction in workforce."

The industries reporting growth in employment in August are: Educational Services; Other Services*; and Health Care & Social Assistance. The eight industries reporting a reduction in employment in August are: Construction; Information; Management of Companies & Support Services; Utilities; Professional, Scientific & Technical Services; Public Administration; Wholesale Trade; and Real Estate, Rental & Leasing.


Employment
%
Higher
%
Same
%
Lower

Index
August 2007 12 70 18 47.9
July 2007 21 66 13 51.7
June 2007 24 67 9 55.0
May 2007 23 68 9 54.9

Supplier Deliveries

In August, supplier deliveries were slower than in July. The index registered 50.5 percent, 1 percentage point lower than in July. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in August are: Real Estate, Rental & Leasing; Management of Companies & Support Services; Information; Wholesale Trade; and Professional, Scientific & Technical Services. The industries reporting faster supplier deliveries in August are: Utilities; Health Care & Social Assistance; Retail Trade; and Public Administration.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
August 2007 7 87 6 50.5
July 2007 8 87 5 51.5
June 2007 8 85 7 50.5
May 2007 7 85 8 49.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 57 percent in August, indicating that inventories are growing at a faster rate compared to July. Inventories are expanding for the seventh consecutive month. Of the total respondents in August, 32 percent indicated they do not have inventories or do not measure them. Comments from members include: "We are increasing our inventory of steel to our max levels to help us react quicker to our customers' needs"; "Correlates with business level"; and "Excess inventory due to decrease in sales."

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


Inventories
%
Higher
%
Same
%
Lower

Index
August 2007 26 62 12 57.0
July 2007 28 54 18 55.0
June 2007 21 63 16 52.5
May 2007 29 64 7 61.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in August for the 51st consecutive month. ISM's Non-Manufacturing Prices Index for August is 58.6 percent, 2.7 percentage points lower than July's index of 61.3 percent. In August, the percentage of respondents reporting higher prices decreased by 6 percentage points to 23 percent as compared to July. The percentage indicating no change remained the same at 68 percent. The percentage of respondents noting lower prices increased by six percent in August.

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


Prices
%
Higher
%
Same
%
Lower

Index
August 2007 23 68 9 58.6
July 2007 29 68 3 61.3
June 2007 35 62 3 65.5
May 2007 41 55 4 66.4

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index registered 50 percent in August, 3 percentage points lower than the 53 percent reported in July. Of the total respondents in August, 41 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in August are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Information; Other Services*; and Public Administration. The industries reporting lower backlog of orders in August are: Transportation & Warehousing; Agriculture, Forestry, Fishing & Hunting; Educational Services; Management of Companies & Support Services; Health Care & Social Assistance; Wholesale Trade; and Retail Trade.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
August 2007 13 74 13 50.0
July 2007 14 78 8 53.0
June 2007 14 65 21 46.5
May 2007 13 70 17 48.0

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 August increased for the fifth consecutive month. The New Export Orders Index for August is 53.5 percent, compared to July's index of 52.5 percent. Of the total respondents in August, 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 August are: Mining; Construction; Accommodation & Food Services; Other Services*; Retail Trade; and Professional, Scientific & Technical Services. The three industries reporting a decrease in export orders are: Public Administration; Agriculture, Forestry, Fishing & Hunting; and Wholesale Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
August 2007 19 69 12 53.5
July 2007 22 61 17 52.5
June 2007 26 66 8 59.0
May 2007 36 60 4 66.0

Imports

In August, the ISM Non-Manufacturing Imports Index registered 55 percent, 0.5 percentage point higher than July's index of 54.5 percent, indicating that use of imports increased in August when compared to July. In August, 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 August are: Transportation & Warehousing; Information; Health Care & Social Assistance; Other Services*; Accommodation & Food Services; and Retail Trade. The one industry reporting a decrease in imports for the month of August is Management of Companies & Support Services.


Imports
%
Higher
%
Same
%
Lower

Index
August 2007 16 78 6 55.0
July 2007 19 71 10 54.5
June 2007 24 67 9 57.5
May 2007 17 77 6 55.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in August registered 61.5 percent, 3.5 percentage points lower than the 65 percent reported in July. This indicates that fewer non-manufacturing purchasing and supply executives feel discomfort with current levels of inventory in August than in July. In August, 27 percent of respondents felt their inventories were too high, 4 percent indicated their inventories were too low, and 69 percent said that their inventories were about right.

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


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
August 2007 27 69 4 61.5
July 2007 35 60 5 65.0
June 2007 23 75 2 60.5
May 2007 26 70 4 61.0

*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 September 2007 data will be released at 10:00 a.m. (ET) on Wednesday, October 3, 2007.


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