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February 2008 Non-Manufacturing ISM Report On Business®

FOR RELEASE: March 5, 2008


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


NMI (Non-Manufacturing Index) at 49.3%

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 February 2008.


Business Activity Index at 50.8%
New Orders Index at 49.6%
Employment Index at 46.9%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector contracted in February, 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. "The NMI (Non-Manufacturing Index) increased 4.7 percentage points to 49.3 percent, indicating contraction for the second consecutive month within the non-manufacturing sector for February 2008. Non-manufacturing business activity increased after one month of contraction. The New Orders Index and the Employment Index both contracted for the second consecutive month. The New Orders Index increased 6.1 percentage points to 49.6 percent. The Employment Index increased 3 percentage points to 46.9 percent. The Prices Index decreased to 67.9 percent in February, indicating a slight slowing in price increases for February. According to the NMI, eight non-manufacturing industries reported growth in February. Members' comments in February are mixed and remain cautious about business conditions."

TOP PERFORMING INDUSTRIES (Based on the NMI)

The eight industries reporting growth in February based on the new NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Other Services*; Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Mining; Professional, Scientific & Technical Services; Utilities; and Construction. The nine industries reporting contraction in February are: Accommodation & Food Services; Transportation & Warehousing; Educational Services; Public Administration; Management of Companies & Support Services; Finance & Insurance; Retail Trade; Information; and Wholesale Trade.

WHAT RESPONDENTS ARE SAYING ...
  • "Business remains strong in 2008 despite signs of an economic downturn." (Professional, Scientific & Technical Services)
  • "January was a very slow month and February has started off at the same pace." (Wholesale Trade)
  • "Business drops significantly as we move away from the holiday season." (Retail Trade)
  • "Weakness continues in both volume and pricing." (Agriculture, Forestry, Fishing & Hunting)
  • "Financial services companies are beginning to stabilize from the effects of the sub prime market issues, but overall will continue to focus on business as usual by increasing productivity of current workforce and supply base and limit any increases at this time." (Finance & Insurance)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
FEBRUARY 2008
  Non-Manufacturing Manufacturing
Index Series
Index
Feb.
Series
Index
Jan.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Feb.
Series
Index
Jan.
Percent
Point
Change
NMI/PMI 49.3 44.6 +4.7 Contracting Slower 2 48.3 50.7 -2.4
Business Activity/Production 50.8 41.9 +8.9 Growing From Contracting 1 50.7 55.2 -4.5
New Orders 49.6 43.5 +6.1 Contracting Slower 2 49.1 49.5 -0.4
Employment 46.9 43.9 +3.0 Contracting Slower 2 46.0 47.1 -1.1
Supplier Deliveries 50.0 49.0 +1.0 Unchanged From Slowing 1 50.1 52.8 -2.7
Inventories 50.0 44.5 +5.5 Unchanged From Contracting 1 45.4 49.1 -3.7
Prices 67.9 70.7 -2.8 Increasing Slower 57 75.5 76.0 -0.5
Backlog of Orders 49.5 46.0 +3.5 Contracting Slower 6 45.0 44.0 +1.0
New Export Orders 46.5 52.0 -5.5 Contracting From Growing 1 56.0 58.5 -2.5
Imports 49.0 41.5 +7.5 Contracting Slower 2 47.5 52.5 -5.0
Inventory Sentiment 60.5 57.0 +3.5 "Too High" Faster 129 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 49.0 49.5 -0.5

* 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

Bearings; Cleaning/Janitorial Products; Computer Supplies; Copier Paper; Corrugated; Cotton Products (2); Diesel Fuel (5); #2 Diesel Fuel (5); Food & Beverage; Fuel (13); Fuel Surcharges (2); Gasoline*(6); Medical Supplies; Office Furniture; Office Supplies; Paper (4); Plastic Products; Polyester and Polyester Products; Stainless Steel Products*; Steel Plate; Steel Products (2); and Sulfuric Acid.

Commodities Down in Price

Computer Accessories/Peripherals; Gasoline*; and Stainless Steel Products*.

Commodities in Short Supply

Coated Groundwood and Coated Paper.

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

*Indicates that commodities were reported both up and down in price.



FEBRUARY 2008 NON-MANUFACTURING INDEX SUMMARIES



NMI (Non-Manufacturing Index)

Beginning with the January 2008 Non-Manufacturing Report On Business®, a composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. The NMI is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. February's NMI at 49.3 percent indicates a contraction in the non-manufacturing sector. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.

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

Business Activity

ISM's Non-Manufacturing Business Activity Index in February registered 50.8 percent, indicating an increase of 8.9 percentage points after a month of contraction in January when the index registered 41.9 percent. Seven industries reported increased business activity, and eight industries reported decreased activity for the month of February. Three industries reported no change from January. Comments from respondents include: "Improving sales volume"; "Increased sales and proposal activity"; and "Increased demand for retail items we produce."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
February 2008 26 47 27 50.8
January 2008 18 40 42 41.9
December 2007 24 54 22 54.4
November 2007 29 51 20 54.6


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Feb 2008 50.8   Aug 2007 56.3
Jan 2008 41.9   Jul 2007 55.9
Dec 2007 54.4   Jun 2007 59.7
Nov 2007 54.6   May 2007 58.4
Oct 2007 55.5   Apr 2007 56.0
Sep 2007 55.7   Mar 2007 53.0
Average for 12 months — 54.4
High — 59.7
Low — 41.9

New Orders

ISM's Non-Manufacturing New Orders Index contracted for the second consecutive month in February. The index increased 6.1 percentage points to 49.6 percent from the seasonally adjusted 43.5 percent registered in January. Comments from respondents include: "Lagging sales"; "Typically slow period, but slower than normal"; and "Increased traffic."

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


New Orders
%
Higher
%
Same
%
Lower

Index
February 2008 24 50 26 49.6
January 2008 18 46 36 43.5
December 2007 25 50 25 53.9
November 2007 20 63 17 52.0

Employment

Employment activity in the non-manufacturing sector contracted in February. ISM's Non-Manufacturing Employment Index for February registered 46.9 percent, a 3 percentage point increase from the seasonally adjusted 43.9 percent reported in January. Six industries reported increased employment, 6 industries reported a decrease, and 6 industries indicated employment is unchanged from January. Comments from respondents include: "Not replacing retirees or voluntary departures"; "Filled budgeted positions"; and "Hiring freeze still in place."

The industries reporting growth in employment in February are: Other Services*; Agriculture, Forestry, Fishing & Hunting; Mining; Management of Companies & Support Services; Information; and Professional, Scientific & Technical Services. The industries reporting a reduction in employment in February are: Accommodation & Food Services; Wholesale Trade; Public Administration; Educational Services; Construction; and Finance & Insurance.


Employment
%
Higher
%
Same
%
Lower

Index
February 2008 14 63 23 46.9
January 2008 6 70 24 43.9
December 2007 16 71 13 51.8
November 2007 17 68 15 51.4

Supplier Deliveries

The rate of supplier deliveries remained unchanged in February with the index registering 50 percent. A reading above 50 percent indicates slower deliveries.

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


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
February 2008 7 86 7 50.0
January 2008 8 82 10 49.0
December 2007 13 79 8 52.5
November 2007 10 83 7 51.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 50 percent in February, indicating that inventory levels were unchanged in February when compared to January. Of the total respondents in February, 28 percent indicated they do not have inventories or do not measure them. Comments from members include: "Purposeful reduction"; "Shedding inventory due to lower volume"; and "Based on business trends, need less stock."

The industries reporting increases in inventories in February are: Real Estate, Rental & Leasing; Other Services*; Mining; Construction; Health Care & Social Assistance; and Information. The industries reporting decreases in inventories in February are: Arts, Entertainment & Recreation; Retail Trade; Utilities; Finance & Insurance; Public Administration; and Management of Companies & Support Services.


Inventories
%
Higher
%
Same
%
Lower

Index
February 2008 24 52 24 50.0
January 2008 14 61 25 44.5
December 2007 26 49 25 50.5
November 2007 22 57 21 50.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in February for the 57th consecutive month. ISM's Non-Manufacturing Prices Index for February registered 67.9 percent, 2.8 percentage points lower than January's seasonally adjusted index of 70.7 percent. In February, the percentage of respondents reporting higher prices remained the same at 41 percent. The percentage indicating no change in prices paid remained the same at 54 percent. The percentage of respondents noting lower prices remained the same at 5 percent.

In February, all industries reported an increase in prices paid in the following order: Agriculture, Forestry, Fishing & Hunting; Mining; Real Estate, Rental & Leasing; Construction; Accommodation & Food Services; Management of Companies & Support Services; Information; Arts, Entertainment & Recreation; Other Services*; Retail Trade; Transportation & Warehousing; Health Care & Social Assistance; Public Administration; Utilities; Educational Services; Professional, Scientific & Technical Services; Wholesale Trade; and Finance & Insurance.


Prices
%
Higher
%
Same
%
Lower

Index
February 2008 41 54 5 67.9
January 2008 41 54 5 70.7
December 2007 37 61 2 71.5
November 2007 46 51 3 73.7

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in February for the sixth consecutive month, registering 49.5 percent, 3.5 percentage points higher than the 46 percent reported in January. Of the total respondents in February, 36 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in February are: Information; Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Other Services*; Utilities; and Health Care & Social Assistance. The industries reporting lower backlog of orders in February are: Management of Companies & Support Services; Educational Services; Finance & Insurance; Professional, Scientific & Technical Services; Retail Trade; Public Administration; Wholesale Trade; and Transportation & Warehousing.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
February 2008 23 53 24 49.5
January 2008 13 66 21 46.0
December 2007 20 58 22 49.0
November 2007 17 63 20 48.5

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 contracted for the month of February. The New Export Orders Index for February registered 46.5 percent, compared to January's index of 52 percent. Of the total respondents in February, 68 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 February are: Utilities; Information; Finance & Insurance; and Retail Trade. The industries reporting a decrease in export orders in February are: Transportation & Warehousing; Accommodation & Food Services; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; and Wholesale Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
February 2008 16 61 23 46.5
January 2008 21 62 17 52.0
December 2007 22 56 22 50.0
November 2007 26 59 15 55.5

Imports

The ISM Non-Manufacturing Imports Index contracted for the second consecutive month in February. The index registered 49 percent, 7.5 percentage points higher than January's index of 41.5 percent. In February, 62 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 February are: Information; Arts, Entertainment & Recreation; Other Services*; Health Care & Social Assistance; and Wholesale Trade. The industries reporting a decrease in imports for the month of February are: Public Administration; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Retail Trade; and Accommodation & Food Services.


Imports
%
Higher
%
Same
%
Lower

Index
February 2008 18 62 20 49.0
January 2008 10 63 27 41.5
December 2007 14 73 13 50.5
November 2007 17 65 18 49.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in February registered 60.5 percent, 3.5 percentage points higher than the 57 percent reported in January. This indicates that more non-manufacturing purchasing and supply executives feel discomfort with current levels of inventory in February than in January. In February, 29 percent of respondents felt their inventories were too high, 8 percent indicated their inventories were too low, and 63 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in February are: Other Services*; Construction; Information; Accommodation & Food Services; Retail Trade; Health Care & Social Assistance; Transportation & Warehousing; Finance & Insurance; and Wholesale Trade. The industries reporting that their inventories are too low are: Mining and Public Administration.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
February 2008 29 63 8 60.5
January 2008 23 68 9 57.0
December 2007 32 65 3 64.5
November 2007 28 67 5 61.5

*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. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The remaining indexes have not indicated significant seasonality.

The NMI is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. 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 March 2008 data will be released at 10:00 a.m. (ET) on Thursday, April 3, 2008.


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