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January 2009 Non-Manufacturing ISM Report On Business®

FOR RELEASE: February 4, 2009


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


NMI at 42.9%

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 January 2009.

This report reflects the U.S. Department of Commerce's recently completed annual adjustments to the seasonal adjustment factors used to calculate the indexes.


Business Activity Index at 44.2%
New Orders Index at 41.6%
Employment Index at 34.4%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector contracted in January, 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 42.9 percent in January, 2.8 percentage points higher than the seasonally adjusted 40.1 percent registered in December, indicating contraction in the non-manufacturing sector for the fourth consecutive month, but at a slightly slower rate. The Non-Manufacturing Business Activity Index increased 5.3 percentage points to 44.2 percent. The New Orders Index increased 2.7 percentage points to 41.6 percent, and the Employment Index decreased 0.1 percentage point to 34.4 percent. The Prices Index increased 6.4 percentage points to 42.5 percent in January, indicating a decrease in prices from December. According to the NMI, two non-manufacturing industries reported growth in January. Respondents are concerned about the global economy and the continued decline in business and spending."

INDUSTRY PERFORMANCE (Based on the NMI)

The two industries reporting growth in January based on the NMI composite index are: Health Care & Social Assistance; and Finance & Insurance. The 16 industries reporting contraction in January — listed in order — are: Mining; Retail Trade; Arts, Entertainment & Recreation; Educational Services; Professional, Scientific & Technical Services; Wholesale Trade; Accommodation & Food Services; Transportation & Warehousing; Other Services; Management of Companies & Support Services; Public Administration; Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Information; Construction; and Utilities.

WHAT RESPONDENTS ARE SAYING ...
  • "Business in general remains strong, and revenues are ahead of budget projections." (Health Care & Social Assistance)
  • "Markets are still depressed, but show signs of stabilizing. We may have hit bottom in the U.S., but uncertainty remains in Europe." (Finance & Insurance)
  • "Sales volumes and revenue have held up. Input costs are down. Credit markets are an issue. Everyone is focused on cash. Extend payables against the force of aggressive collection efforts." (Agriculture, Forestry, Fishing & Hunting)
  • "We anticipate a slow first half of 2009." (Accommodation & Food Services)
  • "Consulting and training projects being delayed and cancelled in public and private sectors." (Professional, Scientific & Technical Services)
  • "Business continues to decline." (Arts, Entertainment & Recreation)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
JANUARY 2009
  Non-Manufacturing Manufacturing
Index Series
Index
Jan.
Series
Index
Dec.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Jan.
Series
Index
Dec.
Percent
Point
Change
NMI/PMI 42.9 40.1 +2.8 Contracting Slower 4 35.6 32.9 +2.7
Business Activity/Production 44.2 38.9 +5.3 Contracting Slower 4 32.1 26.3 +5.8
New Orders 41.6 38.9 +2.7 Contracting Slower 4 33.2 23.1 +10.1
Employment 34.4 34.5 -0.1 Contracting Faster 9 29.9 29.9 0.0
Supplier Deliveries 51.5 48.0 +3.5 Slower From Faster 1 45.3 45.7 -0.4
Inventories 41.5 49.0 -7.5 Contracting Faster 5 37.5 39.6 -2.1
Prices 42.5 36.1 +6.4 Decreasing Slower 3 29.0 18.0 +11.0
Backlog of Orders 37.5 42.5 -5.0 Contracting Faster 6 29.5 23.0 +6.5
New Export Orders 39.0 39.5 -0.5 Contracting Faster 3 37.5 35.5 +2.0
Imports 40.5 32.5 +8.0 Contracting Slower 3 36.5 39.0 -2.5
Inventory Sentiment 62.5 65.5 -3.0 Too High Slower 140 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 55.5 57.0 -1.5

* 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.
Indexes reflect newly released seasonal adjustment factors.


COMMODITIES REPORTED UP / DOWN IN PRICE, and IN SHORT SUPPLY

Commodities Up in Price

Airfares; Bacon; Beef* (2); #1 Diesel Fuel; #2 Diesel Fuel*; Fuel*; Gasoline* (17); and Steel*.

Commodities Down in Price

Beef* (5); Cheese; Copper Products (3); Corrugated Boxes; Dairy Products; Diesel Fuel (5); #2 Diesel Fuel* (6); Drywall; Fuel* (6); Fuel Surcharges (3); Gasoline* (7); #2 Heating Fuel; Plastic Can Liners; Polyethylene Film; Soy Oil (3); Steel*; and Tomatoes.

Commodities in Short Supply

Acetonitrile 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.



JANUARY 2009 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In January, the NMI registered 42.9 percent indicating contraction in the non-manufacturing sector, but at a slightly slower rate compared to December's seasonally adjusted reading of 40.1 percent. 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.

NMI HISTORY
Month NMI Month NMI
Jan 2009 42.9 Jul 2008 49.6
Dec 2008 40.1 Jun 2008 48.8
Nov 2008 37.4 May 2008 51.2
Oct 2008 44.6 Apr 2008 51.9
Sep 2008 50.0 Mar 2008 49.9
Aug 2008 50.4 Feb 2008 49.7
Average for 12 months — 47.2
High — 51.9
Low — 37.4

Business Activity

ISM's Non-Manufacturing Business Activity Index in January registered 44.2 percent, an increase of 5.3 percentage points when compared to the seasonally adjusted 38.9 percent registered in December. Four industries reported increased business activity, and 12 industries reported decreased activity for the month of January. Two industries reported no change from December. Comments from respondents include: "Everyone is afraid to spend funds"; and "Economic downturn lowering bookings."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
Jan 2009 19 43 38 44.2
Dec 2008 17 40 43 38.9
Nov 2008 9 48 43 33.3
Oct 2008 20 47 33 44.5

New Orders

ISM's Non-Manufacturing New Orders Index contracted in January for the fourth consecutive month. The index registered 41.6 percent, which is an increase of 2.7 percentage points from the seasonally adjusted 38.9 percent registered in December. Comments from respondents include: "Light activity due to poor economy"; "Customers holding off on improvements/new work"; and "Customers are adopting a wait-and-see attitude with the economy, as well as a tentative approach to the New Year."

The four industries reporting growth of new orders in January are: Finance & Insurance; Utilities; Construction; and Information. The industries reporting contraction of new orders in January are: Retail Trade; Professional, Scientific & Technical Services; Management of Companies & Support Services; Mining; Other Services; Educational Services; Wholesale Trade; Arts, Entertainment & Recreation; Transportation & Warehousing; Accommodation & Food Services; and Public Administration.


New Orders
%
Higher
%
Same
%
Lower

Index
Jan 2009 15 47 38 41.6
Dec 2008 17 40 43 38.9
Nov 2008 9 52 39 35.6
Oct 2008 18 50 32 44.3

Employment

Employment activity in the non-manufacturing sector contracted in January for the 12th time in the last 13 months. ISM's Non-Manufacturing Employment Index for January registered 34.4 percent. This reflects a decrease of 0.1 percentage point when compared to the seasonally adjusted 34.5 percent registered in December. One industry reported increased employment, 15 industries reported decreased employment, and two industries reported unchanged employment for the month of December. Comments from respondents include: "General economy resulting in a freeze on vacant positions"; "Holding off on new hiring given economic environment"; and "Lower backlog and fewer opportunities."

The only industry reporting an increase in employment in January is Transportation & Warehousing. The industries reporting a reduction in employment in January — listed in order — are: Arts, Entertainment & Recreation; Retail Trade; Information; Accommodation & Food Services; Educational Services; Real Estate, Rental & Leasing; Wholesale Trade; Mining; Public Administration; Professional, Scientific & Technical Services; Construction; Finance & Insurance; Other Services; Utilities; and Health Care & Social Assistance.


Employment
%
Higher
%
Same
%
Lower

Index
Jan 2009 6 53 41 34.4
Dec 2008 9 51 40 34.5
Nov 2008 5 52 43 31.1
Oct 2008 9 61 30 41.7

Supplier Deliveries

Supplier deliveries were slower in January, with the index registering 51.5 percent. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in January are: Management of Companies & Support Services; Professional, Scientific & Technical Services; Other Services; Retail Trade; Health Care & Social Assistance; Information; Accommodation & Food Services; and Construction. The industries reporting faster supplier deliveries in January are: Mining; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Wholesale Trade; Educational Services; and Utilities.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Jan 2009 10 83 7 51.5
Dec 2008 8 80 12 48.0
Nov 2008 6 87 7 49.5
Oct 2008 6 84 10 48.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 41.5 percent in January, indicating that inventory levels contracted in January for the fifth consecutive month. Of the total respondents in January, 29 percent indicated they do not have inventories or do not measure them. Comments from members include: "Technology changes reducing supply needs"; "Reducing the amount being warehoused"; and "Adjusting to business levels."

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


Inventories
%
Higher
%
Same
%
Lower

Index
Jan 2009 16 51 33 41.5
Dec 2008 22 54 24 49.0
Nov 2008 19 54 27 46.0
Oct 2008 21 54 25 48.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services decreased in January for the third consecutive month after 65 consecutive months of increases. ISM's Non-Manufacturing Prices Index for January registered 42.5 percent, 6.4 percentage points higher than December's seasonally adjusted index of 36.1 percent. In January, the percentage of respondents reporting higher prices is 13 percent, the percentage indicating no change in prices paid is 55 percent, and 32 percent of the respondents reported lower prices.

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


Prices
%
Higher
%
Same
%
Lower

Index
Jan 2009 13 55 32 42.5
Dec 2008 9 50 41 36.1
Nov 2008 11 49 40 37.0
Oct 2008 25 52 23 53.3

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in January for the sixth consecutive month. The index registered 37.5 percent, 5 percentage points lower than the 42.5 percent reported in December. Of the total respondents in January, 42 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in January are: Information; Finance & Insurance; and Health Care & Social Assistance. The industries reporting lower backlog of orders in January are: Management of Companies & Support Services; Retail Trade; Professional, Scientific & Technical Services; Other Services; Mining; Wholesale Trade; Utilities; Accommodation & Food Services; Construction; and Public Administration.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Jan 2009 5 65 30 37.5
Dec 2008 15 55 30 42.5
Nov 2008 10 59 31 39.5
Oct 2008 12 64 24 44.0

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 contracted in January. The New Export Orders Index for January registered 39 percent. This is a decrease of 0.5 percentage point from December's index of 39.5 percent. Of the total respondents in January, 73 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The three industries reporting an increase in new export orders in January are: Information; Agriculture, Forestry, Fishing & Hunting; and Professional, Scientific & Technical Services. The industries reporting a decrease in export orders in January are: Management of Companies & Support Services; Other Services; Accommodation & Food Services; Retail Trade; Wholesale Trade; and Transportation & Warehousing.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
Jan 2009 14 50 36 39.0
Dec 2008 14 51 35 39.5
Nov 2008 5 59 36 34.5
Oct 2008 21 58 21 50.0

Imports

The ISM Non-Manufacturing Imports Index registered 40.5 percent in January. The index is 8 percentage points higher than December's index of 32.5 percent. In January, 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 January are: Information; and Health Care & Social Assistance. The industries reporting a decrease in imports for the month of January are: Accommodation & Food Services; Educational Services; Management of Companies & Support Services; Finance & Insurance; Transportation & Warehousing; Other Services; Retail Trade; and Utilities.


Imports
%
Higher
%
Same
%
Lower

Index
Jan 2009 8 65 27 40.5
Dec 2008 0 65 35 32.5
Nov 2008 4 72 24 40.0
Oct 2008 20 64 16 52.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index decreased 3 percentage points to 62.5 percent in January, indicating that respondents still believe their inventories are too high at this time. In January, 31 percent of respondents said their inventories were too high, 6 percent said their inventories were too low, and 63 percent said their inventories were about right.

The industries reporting a feeling that their inventories are too high in January are: Management of Companies & Support Services; Other Services; Information; Wholesale Trade; Professional, Scientific & Technical Services; Finance & Insurance; Accommodation & Food Services; Construction; and Utilities. The two industries reporting that their inventories are too low are: Mining; and Health Care & Social Assistance.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Jan 2009 31 63 6 62.5
Dec 2008 37 57 6 65.5
Nov 2008 34 62 4 65.0
Oct 2008 42 51 7 67.5

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


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