--- To enhance the value and performance of procurement and SCM practitioners and their organizations worldwide ---




December 2008 Non-Manufacturing ISM Report On Business®

FOR RELEASE: January 6, 2009


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


NMI (Non-Manufacturing Index) at 40.6%

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 December 2008.


Business Activity Index at 39.6%
New Orders Index at 39.9%
Employment Index at 34.7%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector contracted in December, 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 40.6 percent in December, 3.3 percentage points higher than the 37.3 percent registered in November, indicating contraction in the non-manufacturing sector for the third consecutive month, but at a slightly slower rate. The Non-Manufacturing Business Activity Index increased 6.6 percentage points to 39.6 percent. The New Orders Index increased 4.5 percentage points to 39.9 percent, and the Employment Index increased 3.4 percentage points to 34.7 percent. The Prices Index decreased 0.6 percentage point to 36 percent in December, indicating a decrease in prices from November. This is the lowest level for the index since it was first reported in 1997. According to the NMI, one non-manufacturing industry reported growth in December. Respondents' comments reflect concern about the overall decline in business, lack of funding, budget cuts and lower employment."

INDUSTRY PERFORMANCE (Based on the NMI)

The one industry reporting growth in December based on the new NMI composite index is Retail Trade. The 17 industries reporting contraction in December — listed in order — are: Wholesale Trade; Professional, Scientific & Technical Services; Mining; Utilities; Transportation & Warehousing; Educational Services; Agriculture, Forestry, Fishing & Hunting; Other Services; Arts, Entertainment & Recreation; Management of Companies & Support Services; Public Administration; Finance & Insurance; Accommodation & Food Services; Construction; Real Estate, Rental & Leasing; Health Care & Social Assistance; and Information.

WHAT RESPONDENTS ARE SAYING ...
  • "Difficulties with consumer and equity loans resulting from economic slowing." (Finance & Insurance)
  • "Business is holding steady in the economic downturn." (Information)
  • "Sales are okay. Credit from suppliers is becoming an issue even with a perfect payment history. Everyone is scared. Prices for most materials declining rapidly." (Agriculture, Forestry, Fishing & Hunting)
  • "State budgets being reduced, corporate clients cancelling training, and clients not acting swiftly on proposals have brought down the backlog and lowered expectations." (Professional, Scientific & Technical Services)
  • "Efforts continue to ramp up to control/reduce spending." (Management of Companies & Support Services)
  • "There has been an overall decline in business. There have been some price decreases as well. Overall capital spend is significantly lower." (Accommodation & Food Services)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
DECEMBER 2008
  Non-Manufacturing Manufacturing
Index Series
Index
Dec.
Series
Index
Nov.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Dec.
Series
Index
Nov.
Percent
Point
Change
NMI/PMI 40.6 37.3 +3.3 Contracting Slower 3 32.4 36.2 -3.8
Business Activity/Production 39.6 33.0 +6.6 Contracting Slower 3 25.5 31.5 -6.0
New Orders 39.9 35.4 +4.5 Contracting Slower 3 22.7 27.9 -5.2
Employment 34.7 31.3 +3.4 Contracting Slower 8 29.9 34.2 -4.3
Supplier Deliveries 48.0 49.5 -1.5 Faster Faster 3 44.9 48.4 -3.5
Inventories 49.0 46.0 +3.0 Contracting Slower 4 38.8 39.1 -0.3
Prices 36.0 36.6 -0.6 Decreasing Faster 2 18.0 25.5 -7.5
Backlog of Orders 42.5 39.5 +3.0 Contracting Slower 5 23.0 27.0 -4.0
New Export Orders 39.5 34.5 +5.0 Contracting Slower 2 35.5 41.0 -5.5
Imports 32.5 40.0 -7.5 Contracting Faster 2 39.0 37.5 +1.5
Inventory Sentiment 65.5 65.0 +0.5 Too High Faster 139 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 57.0 55.0 +2.0

* 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

Autos; Beef*; Food and Beverage (8); and Gasoline* (16).

Commodities Down in Price

Beef* (4); Bottled Water; Chemical Products; Computer Equipment; Construction; Copper Pipe (5); Copper Pipe Fittings; Copper Products (2); Diesel Fuel (4); #1 Diesel Fuel (3); #2 Diesel Fuel (5); Fuel (5); Fuel Surcharges (2); Gasoline* (6); Office and Computer Supplies; Poly Products; PVC Pipe and Fittings; Soy Oil (2); Stainless Steel Plate; Stainless Steel Products; and Steel Products (3).

Commodities in Short Supply

No commodities are 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.



DECEMBER 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 December, the NMI registered 40.6 percent indicating contraction in the non-manufacturing sector, but at a slightly slower rate than in November. 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 one industry reporting growth in December based on the new NMI composite index is Retail Trade. The 17 industries reporting contraction in December — listed in order — are: Wholesale Trade; Professional, Scientific & Technical Services; Mining; Utilities; Transportation & Warehousing; Educational Services; Agriculture, Forestry, Fishing & Hunting; Other Services; Arts, Entertainment & Recreation; Management of Companies & Support Services; Public Administration; Finance & Insurance; Accommodation & Food Services; Construction; Real Estate, Rental & Leasing; Health Care & Social Assistance; and Information.

NMI HISTORY
Month NMI Month NMI
Dec 2008 40.6 Jun 2008 48.2
Nov 2008 37.3 May 2008 51.7
Oct 2008 44.4 Apr 2008 52.0
Sep 2008 50.2 Mar 2008 49.6
Aug 2008 50.6 Feb 2008 49.3
Jul 2008 49.5 Jan 2008 44.6
Average for 12 months — 47.3
High — 52.0
Low — 37.3

Business Activity

ISM's Non-Manufacturing Business Activity Index in December registered 39.6 percent, an increase of 6.6 percentage points when compared to the 33 percent registered in November. One industry reported increased business activity, and 13 industries reported decreased activity for the month of December. Four industries reported no change from November. Comments from respondents include: "Slowdown in general"; "Less disposable income"; and "People eating out less, grocery shopping more."

The industry reporting growth of business activity in December is Retail Trade. The industries reporting decreased business activity in December are: Professional, Scientific & Technical Services; Wholesale Trade; Educational Services; Mining; Other Services; Utilities; Transportation & Warehousing; Public Administration; Arts, Entertainment & Recreation; Health Care & Social Assistance; Accommodation & Food Services; Information; and Finance & Insurance.


Business Activity
%
Higher
%
Same
%
Lower

Index
Dec 2008 17 40 43 39.6
Nov 2008 9 48 43 33.0
Oct 2008 20 47 33 44.2
Sep 2008 23 53 24 52.1


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Dec 2008 39.6   Jun 2008 49.9
Nov 2008 33.0   May 2008 53.6
Oct 2008 44.2   Apr 2008 50.9
Sep 2008 52.1   Mar 2008 52.2
Aug 2008 51.6   Feb 2008 50.8
Jul 2008 49.6   Jan 2008 41.9
Average for 12 months — 47.5
High — 53.6
Low — 33.0

New Orders

ISM's Non-Manufacturing New Orders Index contracted in December for the third consecutive month. The index registered 39.9 percent. This is an increase of 4.5 percentage points from the 35.4 percent registered in November. Comments from respondents include: "Significant reduction in new activity"; "Pending projects put on hold"; and "Less occupancy."

The one industry reporting growth of new orders in December is Retail Trade. The industries reporting contraction of new orders in December are: Professional, Scientific & Technical Services; Educational Services; Mining; Transportation & Warehousing; Wholesale Trade; Finance & Insurance; Construction; Utilities; Health Care & Social Assistance; Information; Other Services; Accommodation & Food Services; and Public Administration.


New Orders
%
Higher
%
Same
%
Lower

Index
Dec 2008 17 40 43 39.9
Nov 2008 9 52 39 35.4
Oct 2008 18 50 32 44.0
Sep 2008 20 57 23 50.8

Employment

Employment activity in the non-manufacturing sector contracted in December for the 11th time in the last 12 months. ISM's Non-Manufacturing Employment Index for December registered 34.7 percent. This reflects an increase of 3.4 percentage points when compared to the 31.3 percent registered in November. All 18 industries reported decreased employment for November. Comments from respondents include: "Budget cuts. Positions that are vacant are being eliminated"; "Planned layoffs"; and "Decreased staff due to slowdown in traffic."

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


Employment
%
Higher
%
Same
%
Lower

Index
Dec 2008 9 51 40 34.7
Nov 2008 5 52 43 31.3
Oct 2008 9 61 30 41.5
Sep 2008 13 60 27 44.2

Supplier Deliveries

Supplier deliveries were faster in December, with the index registering 48 percent. This is the fifth reading below 50 percent in the last 12 months. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in December are: Information; Educational Services; Health Care & Social Assistance; and Retail Trade. The industries reporting faster supplier deliveries in December are: Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Transportation & Warehousing; Utilities; Finance & Insurance; and Public Administration.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Dec 2008 8 80 12 48.0
Nov 2008 6 87 7 49.5
Oct 2008 6 84 10 48.0
Sep 2008 11 85 4 53.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 49 percent in December, indicating that inventory levels contracted in December for the fourth consecutive month. Of the total respondents in December, 29 percent indicated they do not have inventories or do not measure them. Comments from members include: "Inventory is shrinking with business activity — managing to the business climate"; "Working off excess inventory"; and "Watching cash flow."

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


Inventories
%
Higher
%
Same
%
Lower

Index
Dec 2008 22 54 24 49.0
Nov 2008 19 54 27 46.0
Oct 2008 21 54 25 48.0
Sep 2008 20 51 29 45.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services decreased in December for the second consecutive month after 65 consecutive months of increases. ISM's Non-Manufacturing Prices Index for December registered 36 percent, 0.6 percentage point lower than November's index of 36.6 percent. In December, the percentage of respondents reporting higher prices is 9 percent, the percentage indicating no change in prices paid is 50 percent, and 41 percent of the respondents reported lower prices.

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


Prices
%
Higher
%
Same
%
Lower

Index
Dec 2008 9 50 41 36.0
Nov 2008 11 49 40 36.6
Oct 2008 25 52 23 53.4
Sep 2008 46 46 8 70.0

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in December for the fifth consecutive month. The index registered 42.5 percent, 3 percentage points higher than the 39.5 percent reported in November. Of the total respondents in December, 44 percent indicated they do not measure backlog of orders.

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


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Dec 2008 15 55 30 42.5
Nov 2008 10 59 31 39.5
Oct 2008 12 64 24 44.0
Sep 2008 13 67 20 46.5

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 in December. The New Export Orders Index for December registered 39.5 percent. This is an increase of 5 percentage points from November's index of 34.5 percent. Of the total respondents in December, 73 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The two industries reporting an increase in new export orders in December are: Agriculture, Forestry, Fishing & Hunting; and Retail Trade. The industries reporting a decrease in export orders in December are: Public Administration; Real Estate, Rental & Leasing; Accommodation & Food Services; Transportation & Warehousing; and Wholesale Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
Dec 2008 14 51 35 39.5
Nov 2008 5 59 36 34.5
Oct 2008 21 58 21 50.0
Sep 2008 18 65 17 50.5

Imports

The ISM Non-Manufacturing Imports Index registered 32.5 percent in December. The index is 7.5 percentage points lower than November's index of 40 percent. This is the lowest level for the Imports Index since this report began in 1997. In December, 65 percent of respondents reported that they do not use, or do not track, the use of imported materials.

No industry reported an increase in the use of imports in December. The industries reporting a decrease in imports for the month of December are: Public Administration; Information; Other Services; Wholesale Trade; Accommodation & Food Services; Finance & Insurance; Transportation & Warehousing; Utilities; and Health Care & Social Assistance.


Imports
%
Higher
%
Same
%
Lower

Index
Dec 2008 0 65 35 32.5
Nov 2008 4 72 24 40.0
Oct 2008 20 64 16 52.0
Sep 2008 14 67 19 47.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index increased 0.5 percentage point to 65.5 percent in December, indicating that respondents still believe their inventories are too high at this time. In December, 37 percent of respondents said their inventories were too high, 6 percent said their inventories were too low, and 57 percent said their inventories were about right.

The industries reporting a feeling that their inventories are too high in December are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Other Services; Wholesale Trade; Construction; Information; Finance & Insurance; Management of Companies & Support Services; Accommodation & Food Services; Transportation & Warehousing; Professional, Scientific & Technical Services; and Health Care & Social Assistance. The two industries reporting that their inventories are too low are: Public Administration and Retail Trade.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Dec 2008 37 57 6 65.5
Nov 2008 34 62 4 65.0
Oct 2008 42 51 7 67.5
Sep 2008 33 59 8 62.5

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; and Public Administration; and Other Services (services such as 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).

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 January 2009 data will be released at 10:00 a.m. (ET) on Wednesday, February 4, 2009.


Back to Top





Rate and Review this item

Rate this item:



Log in to rate or review this item.