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October 2007 Non-Manufacturing ISM Report On Business®

FOR RELEASE: November 5, 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 October 2007.


New Orders Index at 55.7%
Employment Index at 51.8%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased at a faster rate in October than in September, 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 55th consecutive month in October," Nieves said. He added, "The Business Activity Index increased 1 percentage point to 55.8 percent for the month of October. The New Orders Index increased at a faster rate, with the index registering 55.7 percent. The Employment Index decreased to 51.8 percent and the Prices Index decreased to 63.5 percent in October. Nine non-manufacturing industries reported increased activity in October. Members' comments in October remain mixed and concerned about the uncertainty of business conditions. The overall indication in October is continued economic growth in the non-manufacturing sector at a faster pace than in September."

TOP PERFORMING INDUSTRIES

The nine industries reporting growth in October — listed in order — are: Other Services*; Mining; Retail Trade; Construction; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Arts, Entertainment & Recreation; Accommodation & Food Services; and Health Care & Social Assistance. The four industries reporting decreased activity from September to October are: Management of Companies & Support Services; Information; Wholesale Trade; and Public Administration.

WHAT RESPONDENTS ARE SAYING ...
  • "Overall economic activity is steady. Awaiting approvals on client planned capital spending for 2008." (Professional, Scientific & Technical Services)
  • "Sales are still well below budget, but a strong September finish helped narrow the gap." (Wholesale Trade)
  • "Bracing for the next wave of price increases as a result of record oil prices." (Educational Services)
  • "Business is holding steady and meeting forecast." (Real Estate, Rental & Leasing)
  • "Business is very sluggish." (Retail Trade)
  • "Credit markets continue to severely impact financial services business, especially the mortgage banking sector." (Finance & Insurance)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
OCTOBER 2007
  Non-Manufacturing Manufacturing
Index Series
Index
Oct.
Series
Index
Sept.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Oct.
Series
Index
Sept.
Percent
Point
Change
Business Activity/Production 55.8 54.8 +1.0 Growing Faster 55 49.6 54.6 -5.0
New Orders 55.7 53.4 +2.3 Growing Faster 55 52.5 53.4 -0.9
Employment 51.8 52.7 -0.9 Growing Slower 2 52.0 51.7 +0.3
Supplier Deliveries 50.0 50.5 -0.5 Unchanged From Slowing 1 50.6 51.9 -1.3
Inventories 49.5 50.0 -0.5 Contracting From Unchanged 1 47.2 41.6 +5.6
Prices 63.5 66.1 -2.6 Increasing Slower 53 63.0 59.0 +4.0
Backlog of Orders 43.5 47.0 -3.5 Contracting Faster 2 46.0 51.0 -5.0
New Export Orders 56.0 50.0 +6.0 Growing From Unchanged 1 57.0 54.5 +2.5
Imports 55.5 51.0 +4.5 Growing Faster 7 47.5 53.0 -5.5
Inventory Sentiment 60.0 62.0 -2.0 "Too High" Slower 125 N/A N/A N/A
Customers' Inventories N/A N/A N/A       54.0 50.0 +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 (4); Batteries; Cheese; Copper; Copper Products; Corrugated/Boxes (2); Diesel Fuel; #2 Diesel Fuel; Fuel (9); Gasoline (2)*; Food; Food & Beverage; #2 Heating Fuel; Oil; Petrochemical; Petroleum; Poly Bags; and Travel.

Commodities Down in Price

Gasoline* (5) is the only commodity reported as down in price.

Commodities in Short Supply

Assorted Qualified Labor and Construction Labor.

*Reported both Up and Down in price.

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



OCTOBER 2007 NON-MANUFACTURING INDEX SUMMARIES



Business Activity

ISM's Non-Manufacturing Business Activity Index in October registered 55.8 percent, indicating a faster rate of growth in business activity compared to September. The implication is that non-manufacturing business activity is continuing to increase for the 55th consecutive month. Nine industries reported increased business activity, and four industries reported decreased activity for the month of October.

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


Business Activity
%
Higher
%
Same
%
Lower

Index
October 2007 29 51 20 55.8
September 2007 25 56 19 54.8
August 2007 27 54 19 55.8
July 2007 30 52 18 55.8


THE LAST 12 MONTHS
THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Oct 2007 55.8   Apr 2007 56.0
Sept 2007 54.8   Mar 2007 52.4
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
Average for 12 months — 56.6
High — 60.7
Low — 52.4

New Orders

ISM's Non-Manufacturing New Orders Index increased to 55.7 percent in October from the 53.4 percent registered in September. This indicates continued expansion of new orders at a faster rate than in September. Comments from members include: "Increase in marketing/business development activities" and "Prepping for peak holiday period."

Industries reporting growth of new orders in October are: Other Services*; Agriculture, Forestry, Fishing & Hunting; Mining; Retail Trade; Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Information; and Health Care & Social Assistance. The industries reporting contraction of new orders in October are: Utilities; Wholesale Trade; Management of Companies & Support Services; Educational Services; and Finance & Insurance.


New Orders
%
Higher
%
Same
%
Lower

Index
October 2007 27 54 19 55.7
September 2007 22 59 19 53.4
August 2007 27 57 16 57.0
July 2007 25 57 18 52.8

Employment

Employment activity in the non-manufacturing sector increased in October, but at a slower rate when compared to September. ISM's Non-Manufacturing Employment Index for October is 51.8 percent, a 0.9 percentage point decrease from the 52.7 percent reported in September. Six industries reported increased employment, seven reported a decrease, and five indicated employment is unchanged from September. Comments from respondents include: "Planned staff reductions" and "Reducing head count due to lagging sales."

The industries reporting growth in employment in October are: Transportation & Warehousing; Health Care & Social Assistance; Real Estate, Rental & Leasing; Retail Trade; Finance & Insurance; and Information. The seven industries reporting a reduction in employment in October are: Utilities; Agriculture, Forestry, Fishing & Hunting; Other Services*; Management of Companies & Support Services; Wholesale Trade; Professional, Scientific & Technical Services; and Public Administration.


Employment
%
Higher
%
Same
%
Lower

Index
October 2007 17 66 17 51.8
September 2007 18 66 16 52.7
August 2007 12 70 18 47.9
July 2007 21 66 13 51.7

Supplier Deliveries

In October, the rate of supplier deliveries remained unchanged from September. The index registered 50 percent. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in October are: Utilities; Professional, Scientific & Technical Services; Information; and Finance & Insurance. The industries reporting faster supplier deliveries in October are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Wholesale Trade; Retail Trade; and Public Administration.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
October 2007 9 82 9 50.0
September 2007 7 87 6 50.5
August 2007 7 87 6 50.5
July 2007 8 87 5 51.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 49.5 percent in October, indicating that inventory levels contracted during the month. Of the total respondents in October, 30 percent indicated they do not have inventories or do not measure them. Comments from members include: "Year end inventory" and "Increase in demand."

The industries reporting increases in inventories in October are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Retail Trade; and Health Care & Social Assistance. The industries reporting decreases in inventories in October are: Public Administration; Management of Companies & Support Services; Construction; Wholesale Trade; Finance & Insurance; and Information.


Inventories
%
Higher
%
Same
%
Lower

Index
October 2007 18 63 19 49.5
September 2007 18 64 18 50.0
August 2007 26 62 12 57.0
July 2007 28 54 18 55.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in October for the 53rd consecutive month. ISM's Non-Manufacturing Prices Index for October is 63.5 percent, 2.6 percentage points lower than September's index of 66.1 percent. In October, the percentage of respondents reporting higher prices remained at 30 percent, the same as reported in September. The percentage indicating no change decreased 1 percentage point to 67 percent. The percentage of respondents noting lower prices increased by 1 percentage point in October to 3 percent.

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


Prices
%
Higher
%
Same
%
Lower

Index
October 2007 30 67 3 63.5
September 2007 30 68 2 66.1
August 2007 23 68 9 58.6
July 2007 29 68 3 61.3

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in October for the second consecutive month, registering 43.5 percent, 3.5 percentage points lower than the 47 percent reported in September. Of the total respondents in October, 43 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in October are: Other Services* and Real Estate, Rental & Leasing. The industries reporting lower backlog of orders in October are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Information; Public Administration; Wholesale Trade; Utilities; Professional, Scientific & Technical Services; and Retail Trade.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
October 2007 4 79 17 43.5
September 2007 13 68 19 47.0
August 2007 13 74 13 50.0
July 2007 14 78 8 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 month of October. The New Export Orders Index for October is 56 percent, compared to September's index of 50 percent. Of the total respondents in October, 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 October are: Mining; Accommodation & Food Services; Other Services*; Professional, Scientific & Technical Services; Retail Trade; and Finance & Insurance. The three industries reporting a decrease in export orders are: Public Administration; Information; and Agriculture, Forestry, Fishing & Hunting.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
October 2007 26 60 14 56.0
September 2007 17 66 17 50.0
August 2007 19 69 12 53.5
July 2007 22 61 17 52.5

Imports

In October, the ISM Non-Manufacturing Imports Index registered 55.5 percent, 4.5 percentage points higher than September's index of 51 percent, indicating that use of imports increased at a faster rate in October when compared to September. In October, 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 October are: Information; Transportation & Warehousing; Arts, Entertainment & Recreation; Finance & Insurance; Accommodation & Food Services; Retail Trade; and Wholesale Trade. The industries reporting a decrease in imports for the month of October are: Public Administration; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; and Health Care & Social Assistance.


Imports
%
Higher
%
Same
%
Lower

Index
October 2007 23 65 12 55.5
September 2007 12 78 10 51.0
August 2007 16 78 6 55.0
July 2007 19 71 10 54.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in October registered 60 percent, 2 percentage points lower than the 62 percent reported in September. This indicates that fewer non-manufacturing purchasing and supply executives feel discomfort with current levels of inventory in October than in September. In October, 26 percent of respondents felt their inventories were too high, 6 percent indicated their inventories were too low, and 68 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in October are: Agriculture, Forestry, Fishing & Hunting; Mining; Other Services*; Construction; Information; Wholesale Trade; Professional, Scientific & Technical Services; Retail Trade; and Public Administration. The two industries reporting that their inventories are too low are: Management of Companies & Support Services and Arts, Entertainment & Recreation.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
October 2007 26 68 6 60.0
September 2007 27 70 3 62.0
August 2007 27 69 4 61.5
July 2007 35 60 5 65.0

*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 November 2007 data will be released at 10:00 a.m. (ET) on Wednesday, December 5, 2007.


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