July 2008 Non-Manufacturing ISM Report On Business®

FOR RELEASE: August 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 49.5%

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 2008.


Business Activity Index at 49.6%
New Orders Index at 47.9%
Employment Index at 47.1%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector contracted 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. "The NMI (Non-Manufacturing Index) increased 1.3 percentage points in July to 49.5 percent, indicating contraction for the second consecutive month in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased 0.3 percentage point to 49.6 percent. The New Orders Index decreased 0.7 percentage point to 47.9 percent, and the Employment Index increased 3.3 percentage points to 47.1 percent. The Prices Index decreased 3.7 percentage points to 80.8 percent in July, indicating a slower rate in price increases than in June. According to the NMI, nine non-manufacturing industries reported growth in July. Members' comments in July indicate concern about inflationary pressures and the effect on the economy. Respondents' comments are mixed about business conditions and vary by industry and company."

INDUSTRY PERFORMANCE (Based on the NMI)

The nine industries reporting growth in July based on the new NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Other Services*; Professional, Scientific & Technical Services; Educational Services; Utilities; Construction; Accommodation & Food Services; and Health Care & Social Assistance. The six industries reporting contraction in July are: Finance & Insurance; Public Administration; Wholesale Trade; Information; Transportation & Warehousing; and Retail Trade.

WHAT RESPONDENTS ARE SAYING ...
  • "Our business remains at about the same level as the previous month, with continued focus on cost reduction." (Finance & Insurance)
  • "The general state of the home-building industry has not changed since last month; however, with the commodity and code changes going into 2009, we face much higher construction costs and reduced margins across the entire supply chain." (Construction)
  • "Continue to see slowdown in local economy." (Health Care & Social Assistance)
  • "While still positive, the overall outlook for 2008 for our company is not as high as earlier in the year." (Wholesale Trade)
  • "Governmental spending for services is up this period." (Professional, Scientific & Technical Services)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
JULY 2008
  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
NMI/PMI 49.5 48.2 +1.3 Contracting Slower 2 50.0 50.2 -0.2
Business Activity/Production 49.6 49.9 -0.3 Contracting Faster 2 52.9 51.5 +1.4
New Orders 47.9 48.6 -0.7 Contracting Faster 2 45.0 49.6 -4.6
Employment 47.1 43.8 +3.3 Contracting Slower 3 51.9 43.7 +8.2
Supplier Deliveries 53.5 50.5 +3.0 Slowing Faster 4 55.1 55.1 0.0
Inventories 54.5 53.0 +1.5 Growing Faster 3 45.0 51.2 -6.2
Prices 80.8 84.5 -3.7 Increasing Slower 62 88.5 91.5 -3.0
Backlog of Orders 52.0 49.0 +3.0 Growing From Contracting 1 43.0 47.5 -4.5
New Export Orders 47.5 52.0 -4.5 Contracting From Growing 1 54.0 58.5 -4.5
Imports 49.0 50.5 -1.5 Contracting From Growing 1 46.5 46.0 +0.5
Inventory Sentiment 62.5 60.0 +2.5 "Too High" Faster 134 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 47.0 55.0 -8.0

* 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

A/C Parts; Airfares (5); Air Freight; Auto Fuel (2); Bacon (2); Bath Tissue (2); Batteries; Beef (5); Bond Paper; Bread (3); Building Materials; Butter; Carbon Pipe (2); Cereal (2); Computer Peripherals; Computer Products and Supplies; Copier Paper (6); Copper (3); Crab Legs; Dairy (2); Deliveries (2); Diesel Fuel (10); # 1 Diesel Fuel (3); # 2 Diesel Fuel (3); Flour; Food and Beverage (3); Food Products (3); Freight Charges (2); Freight Fuel Surcharges (2); Fresh Food Items; Fuel (18); Fuel Products (2); Fuel Surcharges (3); Gasoline* (11); Gasoline Related (3); Gloves; Green Beans; # 2 Heating Fuel; Laptop Computers; Lubricants; MRO Supplies; Natural Gas (2); Office Equipment; Paper (9); Paper Products (5); Petroleum Based Products; Plastic Can Liners (2); Plastic Films (2); Plastic Products; Plumbing Supplies; Poly Bags (2); Red Peppers; Shipping Costs (5); Soy; Stainless Steel Products (3); Steel (5); Steel Pipe and Fittings (2); Steel Products (3); Transportation Costs (3); Transportation Services (2); Travel Costs; and Valves.

Commodities Down in Price

Cable (2); Cheese; and Gasoline*.

Commodities in Short Supply

Carbon Pipe and Sulfuric Acid are the only commodities reported in short supply.

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

*Indicates reported both up and down in price.



JULY 2008 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

Beginning with the January 2008 Non-Manufacturing Report On Business®, a composite index is now 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. July's NMI at 49.5 percent indicates contraction in the non-manufacturing sector for the second consecutive month. 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 July are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Other Services*; Professional, Scientific & Technical Services; Educational Services; Utilities; Construction; Accommodation & Food Services; and Health Care & Social Assistance. The industries reporting contraction in July are: Finance & Insurance; Public Administration; Wholesale Trade; Information; Transportation & Warehousing; and Retail Trade.

NMI HISTORY
Month NMI
July 2008 49.5
June 2008 48.2
May 2008 51.7
April 2008 52.0
March 2008 49.6
February 2008 49.3
January 2008 44.6

Business Activity

ISM's Non-Manufacturing Business Activity Index in July registered 49.6 percent, a decrease of 0.3 percentage point when compared to the 49.9 percent registered in June. Eight industries reported increased business activity, and six industries reported decreased activity for the month of July. Four industries reported no change from June. Comments from respondents include: "Less group business than forecast"; "Inflationary pressures — general business slowdown"; and "Careful spending."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
July 2008 24 51 25 49.6
June 2008 28 52 20 49.9
May 2008 32 50 18 53.6
April 2008 29 53 18 50.9


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
July 2008 49.6   Jan 2008 41.9
June 2008 49.9   Dec 2007 54.4
May 2008 53.6   Nov 2007 54.6
Apr 2008 50.9   Oct 2007 55.5
Mar 2008 52.2   Sep 2007 55.7
Feb 2008 50.8   Aug 2007 56.3
Average for 12 months — 52.1
High — 56.3
Low — 41.9

New Orders

ISM's Non-Manufacturing New Orders Index contracted in July for the second consecutive month. The index decreased 0.7 percentage point to 47.9 percent from the 48.6 percent registered in June. Comments from respondents include: "Mid-market business is very slow"; "Advertisers cutting spending"; and "Business is slowing."

Industries reporting growth of new orders in July are: Real Estate, Rental & Leasing; Other Services*; Management of Companies & Support Services; Arts, Entertainment & Recreation; Utilities; Educational Services; and Professional, Scientific & Technical Services. The industries reporting contraction of new orders in July are: Public Administration; Finance & Insurance; Wholesale Trade; Information; and Retail Trade.


New Orders
%
Higher
%
Same
%
Lower

Index
July 2008 20 56 24 47.9
June 2008 24 55 21 48.6
May 2008 29 56 15 53.6
April 2008 26 57 17 50.1

Employment

Employment activity in the non-manufacturing sector contracted in July for the sixth time in the last seven months. ISM's Non-Manufacturing Employment Index for July registered 47.1 percent. This reflects an increase of 3.3 percentage points when compared to the 43.8 percent registered in June. Seven industries reported increased employment, seven industries reported a decrease, and four industries indicated employment is unchanged from June. Comments from respondents include: "Continued cost reductions"; "Positions left vacant not being filled"; and "Hiring freeze in place."

The industries reporting growth in employment in July are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Other Services*; Construction; Utilities; and Public Administration. The industries reporting a reduction in employment in July are: Finance & Insurance; Transportation & Warehousing; Wholesale Trade; Retail Trade; Educational Services; Health Care & Social Assistance; and Information.


Employment
%
Higher
%
Same
%
Lower

Index
July 2008 19 60 21 47.1
June 2008 13 68 19 43.8
May 2008 18 68 14 48.7
April 2008 22 61 17 50.8

Supplier Deliveries

Supplier deliveries were slower in July, with the index registering 53.5 percent. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in July are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Retail Trade; Other Services*; Educational Services; Utilities; Accommodation & Food Services; Health Care & Social Assistance; Wholesale Trade; and Public Administration. The industries reporting faster supplier deliveries in July are: Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Management of Companies & Support Services; and Information.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
July 2008 15 77 8 53.5
June 2008 8 85 7 50.5
May 2008 10 82 8 51.0
April 2008 17 78 5 56.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 54.5 percent in July, indicating that inventory levels grew for the third consecutive month in July after contracting in April. Of the total respondents in July, 35 percent indicated they do not have inventories or do not measure them. Comments from members include: "Excess inventory due to lower sales levels three months in a row"; "Backorders increasing so need additional safety stock"; and "Keeping it very tight and as needed."

The industries reporting increases in inventories in July are: Mining; Real Estate, Rental & Leasing; Other Services*; Health Care & Social Assistance; Retail Trade; Wholesale Trade; Utilities; and Finance & Insurance. The industries reporting decreases in inventories in July are: Information; Transportation & Warehousing; Public Administration; and Arts, Entertainment & Recreation.


Inventories
%
Higher
%
Same
%
Lower

Index
July 2008 22 65 13 54.5
June 2008 24 58 18 53.0
May 2008 28 52 20 54.0
April 2008 17 60 23 47.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in July for the 62nd consecutive month. ISM's Non-Manufacturing Prices Index for July registered 80.8 percent, 3.7 percentage points lower than June's index of 84.5 percent. In July, the percentage of respondents reporting higher prices is 66 percent, the percentage indicating no change in prices paid is 30 percent, and 4 percent of the respondents reported lower prices.

In July, all 18 industries reported an increase in prices paid in the following order: Mining; Real Estate, Rental & Leasing; Accommodation & Food Services; Utilities; Construction; Transportation & Warehousing; Wholesale Trade; Retail Trade; Public Administration; Management of Companies & Support Services; Educational Services; Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Finance & Insurance; Agriculture, Forestry, Fishing & Hunting; Other Services*; Health Care & Social Assistance; and Information.


Prices
%
Higher
%
Same
%
Lower

Index
July 2008 66 30 4 80.8
June 2008 72 26 2 84.5
May 2008 65 34 1 77.0
April 2008 60 38 2 72.1

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew in July after two months of contraction. The index registered 52 percent, 3 percentage points higher than the 49 percent reported in June. Of the total respondents in July, 44 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in July are: Mining; Other Services*; Educational Services; Accommodation & Food Services; Retail Trade; and Health Care & Social Assistance. The industries reporting lower backlog of orders in July are: Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Finance & Insurance; and Public Administration.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
July 2008 20 64 16 52.0
June 2008 14 70 16 49.0
May 2008 16 66 18 49.0
April 2008 15 70 15 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 indicated contraction for the month of July. The New Export Orders Index for July registered 47.5 percent, compared to June's index of 52 percent. Of the total respondents in July, 70 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; Professional, Scientific & Technical Services; and Retail Trade. The industries reporting a decrease in export orders in July are: Educational Services; Management of Companies & Support Services; Transportation & Warehousing; Wholesale Trade; Finance & Insurance; and Accommodation & Food Services.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
July 2008 22 51 27 47.5
June 2008 24 56 20 52.0
May 2008 23 62 15 54.0
April 2008 18 61 21 48.5

Imports

The ISM Non-Manufacturing Imports Index registered 49 percent in July. The index is 1.5 percentage points lower than June's index of 50.5 percent. In July, 64 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: Arts, Entertainment & Recreation; Other Services*; and Finance & Insurance. The industries reporting a decrease in imports for the month of July are: Educational Services; Agriculture, Forestry, Fishing & Hunting; and Wholesale Trade.


Imports
%
Higher
%
Same
%
Lower

Index
July 2008 11 76 13 49.0
June 2008 12 77 11 50.5
May 2008 15 66 19 48.0
April 2008 16 68 16 50.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index increased 2.5 percentage points to 62.5 percent in July, indicating that respondents still believe their inventories are too high at this time. In July, 29 percent of respondents said their inventories were too high, 4 percent said their inventories were too low, and 67 percent said their inventories were about right.

The industries reporting a feeling that their inventories are too high in July are: Other Services*; Wholesale Trade; Information; Health Care & Social Assistance; Construction; Professional, Scientific & Technical Services; Public Administration; and Retail Trade. The two industries reporting that their inventories are too low are: Agriculture, Forestry, Fishing & Hunting; and Transportation & Warehousing.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
July 2008 29 67 4 62.5
June 2008 28 64 8 60.0
May 2008 35 63 2 66.5
April 2008 28 70 2 63.0

*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, and the diffusion index. 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 August 2008 data will be released at 10:00 a.m. (ET) on Thursday, September 4, 2008.


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