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August 2008 Non-Manufacturing ISM Report On Business®

FOR RELEASE: September 4, 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 50.6%

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 2008.


Business Activity Index at 51.6%
New Orders Index at 49.7%
Employment Index at 45.4%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in August, 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 1.1 percentage points in August to 50.6 percent, indicating growth after two months of contraction in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 2 percentage points to 51.6 percent. The New Orders Index increased 1.8 percentage points to 49.7 percent, and the Employment Index decreased 1.7 percentage points to 45.4 percent. The Prices Index decreased 7.9 percentage points to 72.9 percent in August, indicating a slower rate in price increases than in July. According to the NMI, 10 non-manufacturing industries reported growth in August. Respondents' comments remain mixed about business conditions and reflect concern about the uncertainty of the economy."

INDUSTRY PERFORMANCE (Based on the NMI)

The 10 industries reporting growth in August based on the new NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Mining; Health Care & Social Assistance; Educational Services; Utilities; Agriculture, Forestry, Fishing & Hunting; Construction; Professional, Scientific & Technical Services; Other Services*; and Information. The eight industries reporting contraction in August are: Transportation & Warehousing; Finance & Insurance; Accommodation & Food Services; Wholesale Trade; Arts, Entertainment & Recreation; Management of Companies & Support Services; Retail Trade; and Public Administration.

WHAT RESPONDENTS ARE SAYING ...
  • "Despite constant reminders of a tough economy ... business prospects are fairly strong." (Professional, Scientific & Technical Services)
  • "Fuel is easing, impacting many areas positively, but distributors are still under tremendous pressure due to the cost of diesel." (Accommodation & Food Services)
  • "Although we've had some relief recently, energy prices continue to influence buying and budgeting decisions." (Public Administration)
  • "New home construction continues to struggle under the weight of the current unsold housing inventory." (Wholesale Trade)
  • "If the drop in oil prices can be sustained, we should see a more profitable third quarter." (Utilities)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
AUGUST 2008
  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
NMI/PMI 50.6 49.5 +1.1 Growing From Contracting 1 49.9 50.0 -0.1
Business Activity/Production 51.6 49.6 +2.0 Growing From Contracting 1 52.1 52.9 -0.8
New Orders 49.7 47.9 +1.8 Contracting Slower 3 48.3 45.0 +3.3
Employment 45.4 47.1 -1.7 Contracting Faster 4 49.7 51.9 -2.2
Supplier Deliveries 55.5 53.5 +2.0 Slowing Faster 5 50.3 55.1 -4.8
Inventories 53.5 54.5 -1.0 Growing Slower 4 49.3 45.0 +4.3
Prices 72.9 80.8 -7.9 Increasing Slower 63 77.0 88.5 -11.5
Backlog of Orders 49.0 52.0 -3.0 Contracting From Growing 1 43.5 43.0 +0.5
New Export Orders 44.5 47.5 -3.0 Contracting Faster 2 57.0 54.0 +3.0
Imports 46.0 49.0 -3.0 Contracting Faster 2 48.5 46.5 +2.0
Inventory Sentiment 66.0 62.5 +3.5 "Too High" Faster 135 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 54.5 47.0 +7.5

* 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

Airfares (6); Air Freight (2); Aluminum Products; Asparagus; Auto Fuel (3); Beef (6); Broccoli; Cable; Carbon Steel Pipe (3); Carpet; Cleaning Supplies; Copier Paper (7); Corrugated Products; #1 Diesel Fuel (4); #2 Diesel Fuel* (4); Exam Gloves; Food and Beverage (4); Food Products (4); Freight Charges (3); Freight Fuel Surcharges (3); Fuel* (19); Fuel Products (3); Fuel Surcharges (4); Gasoline* (12); #2 Heating Fuel (2); HVAC Equipment; IV Solutions; Latex Gloves (2); Medical and Surgical Supplies; Packaging; Paper (10); Paper Products (6); Petroleum Based Products (2); Piping Valves; Plastic Can Liners (3); Plastic Cups; Plastic Dinnerware; Plastic Pipe/Pipe Fittings; Poly Bags (3); Roofing Materials; Shipping Costs (6); Steel (6); Steel Pipe (3); Transportation Services (3); Travel Costs (2); Vehicle Rentals; and Wine.

Commodities Down in Price

Computer and Related Items; Copper Pipe; Copper Pipe Fittings; #2 Diesel Fuel*; Fuel*; Gasoline* (2); and Natural Gas.

Commodities in Short Supply

Latex Gloves is the only commodity 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.



AUGUST 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. In August, the NMI at 50.6 percent indicates growth 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 August are: Real Estate, Rental & Leasing; Mining; Health Care & Social Assistance; Educational Services; Utilities; Agriculture, Forestry, Fishing & Hunting; Construction; Professional, Scientific & Technical Services; Other Services*; and Information. The industries reporting contraction in August are: Transportation & Warehousing; Finance & Insurance; Accommodation & Food Services; Wholesale Trade; Arts, Entertainment & Recreation; Management of Companies & Support Services; Retail Trade; and Public Administration.

NMI HISTORY
Month NMI Month NMI
Aug 2008 50.6 Apr 2008 52.0
Jul 2008 49.5 Mar 2008 49.6
Jun 2008 48.2 Feb 2008 49.3
May 2008 51.7 Jan 2008 44.6

Business Activity

ISM's Non-Manufacturing Business Activity Index in August registered 51.6 percent, an increase of 2 percentage points when compared to the 49.6 percent registered in July. Seven industries reported increased business activity, and seven industries reported decreased activity for the month of August. Four industries reported no change from July. Comments from respondents include: "New customer orders"; "Major project initiatives"; and "Commodity sales are up."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
Aug 2008 23 53 24 51.6
Jul 2008 24 51 25 49.6
Jun 2008 28 52 20 49.9
May 2008 32 50 18 53.6


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Aug 2008 51.6   Feb 2008 50.8
Jul 2008 49.6   Jan 2008 41.9
Jun 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
Average for 12 months — 51.7
High — 55.7
Low — 41.9

New Orders

ISM's Non-Manufacturing New Orders Index contracted in August for the third consecutive month. The index increased 1.8 percentage points to 49.7 percent from the 47.9 percent registered in July. Comments from respondents include: "Demand continues to ebb"; "Budget constraints"; and "Slower business activity and seasonal impacts."

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


New Orders
%
Higher
%
Same
%
Lower

Index
Aug 2008 24 51 25 49.7
Jul 2008 20 56 24 47.9
Jun 2008 24 55 21 48.6
May 2008 29 56 15 53.6

Employment

Employment activity in the non-manufacturing sector contracted in August for the seventh time in the last eight months. ISM's Non-Manufacturing Employment Index for August registered 45.4 percent. This reflects a decrease of 1.7 percentage points when compared to the 47.1 percent registered in July. Six industries reported increased employment, 10 industries reported a decrease, and two industries indicated employment is unchanged from July. Comments from respondents include: "Cutting back for an expected slow/sluggish fourth quarter"; "Hiring freeze for all but essential positions"; and "We have experienced dismissals and retirements without replacements."

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


Employment
%
Higher
%
Same
%
Lower

Index
Aug 2008 13 62 25 45.4
Jul 2008 19 60 21 47.1
Jun 2008 13 68 19 43.8
May 2008 18 68 14 48.7

Supplier Deliveries

Supplier deliveries were slower in August, with the index registering 55.5 percent. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in August are: Construction; Utilities; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Retail Trade; Transportation & Warehousing; Health Care & Social Assistance; and Wholesale Trade. The industries reporting faster supplier deliveries in August are: Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; and Finance & Insurance.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Aug 2008 16 79 5 55.5
Jul 2008 15 77 8 53.5
Jun 2008 8 85 7 50.5
May 2008 10 82 8 51.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 53.5 percent in August, indicating that inventory levels grew in August for the fourth consecutive month. Of the total respondents in August, 28 percent indicated they do not have inventories or do not measure them. Comments from members include: "Inventory reduced to match reduced business"; "Conserving cash"; and "Inventory reduction plan."

The industries reporting increases in inventories in August are: Mining; Agriculture, Forestry, Fishing & Hunting; Utilities; Health Care & Social Assistance; Information; and Retail Trade. The industries reporting decreases in inventories in August are: Management of Companies & Support Services; Public Administration; Wholesale Trade; Accommodation & Food Services; Arts, Entertainment & Recreation; and Real Estate, Rental & Leasing.


Inventories
%
Higher
%
Same
%
Lower

Index
Aug 2008 20 67 13 53.5
Jul 2008 22 65 13 54.5
Jun 2008 24 58 18 53.0
May 2008 28 52 20 54.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in August for the 63rd consecutive month. ISM's Non-Manufacturing Prices Index for August registered 72.9 percent, 7.9 percentage points lower than July's index of 80.8 percent. In August, the percentage of respondents reporting higher prices is 50 percent, the percentage indicating no change in prices paid is 38 percent, and 12 percent of the respondents reported lower prices.

In August, 16 industries reported an increase in prices paid in the following order: Mining; Transportation & Warehousing; Management of Companies & Support Services; Utilities; Arts, Entertainment & Recreation; Retail Trade; Accommodation & Food Services; Health Care & Social Assistance; Public Administration; Finance & Insurance; Real Estate, Rental & Leasing; Other Services*; Construction; Professional, Scientific & Technical Services; Educational Services; and Wholesale Trade. The two industries reporting prices as unchanged for the month of August are Information; and Agriculture, Forestry, Fishing & Hunting.


Prices
%
Higher
%
Same
%
Lower

Index
Aug 2008 50 38 12 72.9
Jul 2008 66 30 4 80.8
Jun 2008 72 26 2 84.5
May 2008 65 34 1 77.0

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in August after one month of growth. The index registered 49 percent, 3 percentage points lower than the 52 percent reported in July. Of the total respondents in August, 44 percent indicated they do not measure backlog of orders.

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


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Aug 2008 14 70 16 49.0
Jul 2008 20 64 16 52.0
Jun 2008 14 70 16 49.0
May 2008 16 66 18 49.0

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 in August for the second consecutive month. The New Export Orders Index for August registered 44.5 percent, compared to July's index of 47.5 percent. Of the total respondents in August, 74 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The one industry reporting an increase in new export orders in August is Other Services*. The industries reporting a decrease in export orders in August are: Arts, Entertainment & Recreation; Accommodation & Food Services; Transportation & Warehousing; Finance & Insurance; Wholesale Trade; and Retail Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
Aug 2008 9 71 20 44.5
Jul 2008 22 51 27 47.5
Jun 2008 24 56 20 52.0
May 2008 23 62 15 54.0

Imports

The ISM Non-Manufacturing Imports Index registered 46 percent in August. The index is 3 percentage points lower than July's index of 49 percent. In August, 56 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The one industry reporting an increase in the use of imports in August is Real Estate, Rental & Leasing. The industries reporting a decrease in imports for the month of August are: Transportation & Warehousing; Public Administration; Utilities; Wholesale Trade; Retail Trade; and Finance & Insurance.


Imports
%
Higher
%
Same
%
Lower

Index
Aug 2008 5 82 13 46.0
Jul 2008 11 76 13 49.0
Jun 2008 12 77 11 50.5
May 2008 15 66 19 48.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index increased 3.5 percentage points to 66 percent in August, indicating that respondents still believe their inventories are too high at this time. In August, 34 percent of respondents said their inventories were too high, 2 percent said their inventories were too low, and 64 percent said their inventories were about right.

The industries reporting a feeling that their inventories are too high in August are: Real Estate, Rental & Leasing; Utilities; Retail Trade; Wholesale Trade; Accommodation & Food Services; Public Administration; Finance & Insurance; Health Care & Social Assistance; and Construction. The one industry reporting that their inventories are too low is Transportation & Warehousing.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Aug 2008 34 64 2 66.0
Jul 2008 29 67 4 62.5
Jun 2008 28 64 8 60.0
May 2008 35 63 2 66.5

*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, 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 September 2008 data will be released at 10:00 a.m. (ET) on Friday, October 3, 2008.


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