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September 2008 Non-Manufacturing ISM Report On Business®

FOR RELEASE: October 3, 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 50.2%

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 September 2008.


Business Activity Index at 52.1%
New Orders Index at 50.8%
Employment Index at 44.2%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew 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. "The NMI (Non-Manufacturing Index) registered 50.2 percent in September, 0.4 percentage point lower than the 50.6 percent registered in August, indicating growth for the second consecutive month in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 0.5 percentage point to 52.1 percent. The New Orders Index increased 1.1 percentage points to 50.8 percent, and the Employment Index decreased 1.2 percentage points to 44.2 percent. The Prices Index decreased 2.9 percentage points to 70 percent in September, indicating a slower rate in price increases than in August. According to the NMI, 10 non-manufacturing industries reported growth in September. Respondents' comments are positive about the reduction in fuel and commodity costs; however, they remain concerned about overall market conditions and the economy."

INDUSTRY PERFORMANCE (Based on the NMI)

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

WHAT RESPONDENTS ARE SAYING ...
  • "Business activity has stayed steady over the last month; no increases or decreases." (Construction)
  • "Conditions are still not good, but there are signs of improvement." (Retail Trade)
  • "Continue to see a retrenchment in expenses as we continually adjust expectations downward." (Information)
  • "Business is good." (Transportation & Warehousing)
  • "Public sector facing continued financial and revenue pressures. Most all capital expenditures are being deferred. Orders for routine supplies are reviewed for savings opportunities." (Public Administration)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
SEPTEMBER 2008
  Non-Manufacturing Manufacturing
Index Series
Index
Sept.
Series
Index
August
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Sept.
Series
Index
August
Percent
Point
Change
NMI/PMI 50.2 50.6 -0.4 Growing Slower 2 43.5 49.9 -6.4
Business Activity/Production 52.1 51.6 +0.5 Growing Faster 2 40.8 52.1 -11.3
New Orders 50.8 49.7 +1.1 Growing From Contracting 1 38.8 48.3 -9.5
Employment 44.2 45.4 -1.2 Contracting Faster 5 41.8 49.7 -7.9
Supplier Deliveries 53.5 55.5 -2.0 Slowing Slower 6 52.5 50.3 +2.2
Inventories 45.5 53.5 -8.0 Contracting From Growing 1 43.4 49.3 -5.9
Prices 70.0 72.9 -2.9 Increasing Slower 64 53.5 77.0 -23.5
Backlog of Orders 46.5 49.0 -2.5 Contracting Faster 2 35.0 43.5 -8.5
New Export Orders 50.5 44.5 +6.0 Growing From Contracting 1 52.0 57.0 -5.0
Imports 47.5 46.0 +1.5 Contracting Slower 3 44.0 48.5 -4.5
Inventory Sentiment 62.5 66.0 -3.5 "Too High" Slower 136 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 53.5 54.5 -1.0

* 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

Airfares (7); Building Materials; Chemicals; Chemical Products; Copier Paper (8); Corrugated Products (2); #1 Diesel Fuel (5); #2 Diesel Fuel* (5); Food and Beverage (5); Freight Charges (4); Freight Fuel Surcharges (4); Fuel Surcharges (5); Furniture; Galvanized Steel; Gasoline* (13); #2 Heating Fuel* (3); Large Bore Bearings; Latex Gloves (3); Medical and Surgical Supplies (2); Paper Products (7); Petroleum Based Products (3); Plastic Can Liners (4); Plastic Cups (2); Plastic Film Laminates; Plastic Items; Poly Bags (4); Roofing Shingles; Steel (7); Steel Plate; Steel Products; and Sulfuric Acid.

Commodities Down in Price

Beef; Computer and Related Items (2); Copper Pipe (2); Copper Pipe Fittings (2); Copper Tubing; Copper Wire; Diesel Fuel; #2 Diesel Fuel* (2); Fuel (2); Gasoline* (3); and #2 Heating Fuel*.

Commodities in Short Supply

Large Bore Bearings 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.



SEPTEMBER 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 September, the NMI at 50.2 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 September are: Other Services*; Mining; Educational Services; Agriculture, Forestry, Fishing & Hunting; Utilities; Retail Trade; Construction; Health Care & Social Assistance; Transportation & Warehousing; and Information. The industries reporting contraction in September are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Accommodation & Food Services; Public Administration; Finance & Insurance; Management of Companies & Support Services; Wholesale Trade; and Professional, Scientific & Technical Services.

NMI HISTORY
Month NMI Month NMI
Sep 2008 50.2 Apr 2008 52.0
Aug 2008 50.6 Mar 2008 49.6
Jul 2008 49.5 Feb 2008 49.3
Jun 2008 48.2 Jan 2008 44.6
May 2008 51.7    

Business Activity

ISM's Non-Manufacturing Business Activity Index in September registered 52.1 percent, an increase of 0.5 percentage point when compared to the 51.6 percent registered in August. Six industries reported increased business activity, and seven industries reported decreased activity for the month of September. Five industries reported no change from August. Comments from respondents include: "Strong promotions"; "Seasonal factors and new acquisitions"; and "General turnaround from the summer months."

The industries reporting growth of business activity in September are: Mining; Other Services*; Health Care & Social Assistance; Retail Trade; Construction; and Educational Services. The industries reporting decreased business activity in September are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; Finance & Insurance; Wholesale Trade; and Transportation & Warehousing


Business Activity
%
Higher
%
Same
%
Lower

Index
Sep 2008 23 53 24 52.1
Aug 2008 23 53 24 51.6
Jul 2008 24 51 25 49.6
Jun 2008 28 52 20 49.9


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Sep 2008 52.1   Mar 2008 52.2
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
Average for 12 months — 51.4
High — 55.5
Low — 41.9

New Orders

ISM's Non-Manufacturing New Orders Index grew in September after three consecutive months of contraction. The index increased 1.1 percentage points to 50.8 percent from the 49.7 percent registered in August. Comments from respondents include: "Purchases had to be held back as long as possible and finally had to be executed" and "New store."

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


New Orders
%
Higher
%
Same
%
Lower

Index
Sep 2008 20 57 23 50.8
Aug 2008 24 51 25 49.7
Jul 2008 20 56 24 47.9
Jun 2008 24 55 21 48.6

Employment

Employment activity in the non-manufacturing sector contracted in September for the eighth time in the last nine months. ISM's Non-Manufacturing Employment Index for September registered 44.2 percent. This reflects a decrease of 1.2 percentage points when compared to the 45.4 percent registered in August. Six industries reported increased employment, 10 industries reported a decrease, and two industries indicated employment is unchanged from August. Comments from respondents include: "Natural attrition not being backfilled to reduce expense" and "We are implementing lean and that is reducing the need for excess labor."

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


Employment
%
Higher
%
Same
%
Lower

Index
Sep 2008 13 60 27 44.2
Aug 2008 13 62 25 45.4
Jul 2008 19 60 21 47.1
Jun 2008 13 68 19 43.8

Supplier Deliveries

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

The industries reporting slowing in supplier deliveries in September are: Real Estate, Rental & Leasing; Educational Services; Other Services*; Construction; Transportation & Warehousing; Health Care & Social Assistance; Retail Trade; Utilities; Accommodation & Food Services; and Public Administration. The industries reporting faster supplier deliveries in September are: Finance & Insurance and Wholesale Trade.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Sep 2008 11 85 4 53.5
Aug 2008 16 79 5 55.5
Jul 2008 15 77 8 53.5
Jun 2008 8 85 7 50.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 45.5 percent in September, indicating that inventory levels contracted in September after four consecutive months of growth. Of the total respondents in September, 30 percent indicated they do not have inventories or do not measure them. Comments from members include: "Reduction program of inventory has been ongoing since beginning of year" and "Minimize carrying costs."

The industries reporting increases in inventories in September are: Agriculture, Forestry, Fishing & Hunting; Mining; Other Services*; Health Care & Social Assistance; Finance & Insurance; and Utilities. The industries reporting decreases in inventories in September are: Real Estate, Rental & Leasing; Accommodation & Food Services; Public Administration; Arts, Entertainment & Recreation; Wholesale Trade; Construction; Information; and Retail Trade.


Inventories
%
Higher
%
Same
%
Lower

Index
Sep 2008 20 51 29 45.5
Aug 2008 20 67 13 53.5
Jul 2008 22 65 13 54.5
Jun 2008 24 58 18 53.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in September for the 64th consecutive month. ISM's Non-Manufacturing Prices Index for September registered 70 percent, 2.9 percentage points lower than August's index of 72.9 percent. In September, the percentage of respondents reporting higher prices is 46 percent, the percentage indicating no change in prices paid is 46 percent, and 8 percent of the respondents reported lower prices.

In September, 15 industries reported an increase in prices paid in the following order: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Transportation & Warehousing; Accommodation & Food Services; Retail Trade; Real Estate, Rental & Leasing; Health Care & Social Assistance; Educational Services; Wholesale Trade; Finance & Insurance; Arts, Entertainment & Recreation; Other Services*; and Public Administration. The two industries reporting prices as decreasing for the month of September are: Information; and Professional, Scientific & Technical Services. The one industry reporting prices as unchanged is Management of Companies & Support Services.


Prices
%
Higher
%
Same
%
Lower

Index
Sep 2008 46 46 8 70.0
Aug 2008 50 38 12 72.9
Jul 2008 66 30 4 80.8
Jun 2008 72 26 2 84.5

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in September. The index registered 46.5 percent, 2.5 percentage points lower than the 49 percent reported in August. Of the total respondents in September, 36 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in September are: Other Services*; Educational Services; Accommodation & Food Services; and Utilities. The industries reporting lower backlog of orders in September are: Transportation & Warehousing; Professional, Scientific & Technical Services; Information; Health Care & Social Assistance; Finance & Insurance; Public Administration; and Wholesale Trade.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Sep 2008 13 67 20 46.5
Aug 2008 14 70 16 49.0
Jul 2008 20 64 16 52.0
Jun 2008 14 70 16 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 growth in September after two consecutive months of contraction. The New Export Orders Index for September registered 50.5 percent, compared to August's index of 44.5 percent. Of the total respondents in September, 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 September are: Construction; Other Services*; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; and Professional, Scientific & Technical Services. The industries reporting a decrease in export orders in September are: Arts, Entertainment & Recreation; Transportation & Warehousing; Public Administration; Retail Trade; and Wholesale Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
Sep 2008 18 65 17 50.5
Aug 2008 9 71 20 44.5
Jul 2008 22 51 27 47.5
Jun 2008 24 56 20 52.0

Imports

The ISM Non-Manufacturing Imports Index registered 47.5 percent in September. The index is 1.5 percentage points higher than August's index of 46 percent. In September, 59 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 September are: Management of Companies & Support Services and Wholesale Trade. The industries reporting a decrease in imports for the month of September are: Public Administration; Arts, Entertainment & Recreation; Transportation & Warehousing; Retail Trade; and Other Services*.


Imports
%
Higher
%
Same
%
Lower

Index
Sep 2008 14 67 19 47.5
Aug 2008 5 82 13 46.0
Jul 2008 11 76 13 49.0
Jun 2008 12 77 11 50.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index decreased 3.5 percentage points to 62.5 percent in September, indicating that respondents still believe their inventories are too high at this time. In September, 33 percent of respondents said their inventories were too high, 8 percent said their inventories were too low, and 59 percent said their inventories were about right.

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


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Sep 2008 33 59 8 62.5
Aug 2008 34 64 2 66.0
Jul 2008 29 67 4 62.5
Jun 2008 28 64 8 60.0

*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 October 2008 data will be released at 10:00 a.m. (ET) on Wednesday, November 5, 2008.


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