February 2009 Non-Manufacturing ISM Report On Business®

FOR RELEASE: March 4, 2009


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


NMI at 41.6%

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 February 2009.


Business Activity Index at 40.2%
New Orders Index at 40.7%
Employment Index at 37.3%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector contracted in February, 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 41.6 percent in February, 1.3 percentage points lower than the 42.9 percent registered in January, indicating contraction in the non-manufacturing sector for the fifth consecutive month at a slightly faster rate. The Non-Manufacturing Business Activity Index decreased 4 percentage points to 40.2 percent. The New Orders Index decreased 0.9 percentage point to 40.7 percent, and the Employment Index increased 2.9 percentage points to 37.3 percent. The Prices Index increased 5.6 percentage points to 48.1 percent in February, indicating a slower decrease in prices from January. According to the NMI, one non-manufacturing industry reported growth in February. Respondents are concerned about the soft market conditions, the negative outlook for employment and the overall state of the economy."

INDUSTRY PERFORMANCE (Based on the NMI)

The one industry reporting growth in February based on the NMI composite index is Arts, Entertainment & Recreation. The 14 industries reporting contraction in February — listed in order — are: Wholesale Trade; Management of Companies & Support Services; Mining; Information; Retail Trade; Other Services; Accommodation & Food Services; Public Administration; Educational Services; Construction; Professional, Scientific & Technical Services; Utilities; Transportation & Warehousing; and Finance & Insurance.

WHAT RESPONDENTS ARE SAYING ...
  • "General market conditions are still retracting, with financing being the largest barrier for new orders." (Construction)
  • "Sales volumes are steady. Margins are up as input costs decline. Suppliers are having a difficult time with credit. Concerned that not all of them will survive." (Agriculture, Forestry, Fishing & Hunting)
  • "Continued low occupancy. Group booking cancellations." (Accommodation & Food Services)
  • "We continue to lend; however, the credit of a lot of these consumers is so poor that half of our deals never make it through our credit committee." (Finance & Insurance)
  • "Declining value of endowment will continue to push back construction plans, halt program development, and lead to staff and faculty reductions." (Educational Services)
  • "Extreme care given to capital outlay due to budget restrictions given the economy." (Public Administration)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
FEBRUARY 2009
  Non-Manufacturing Manufacturing
Index Series
Index
Feb.
Series
Index
Jan.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Feb.
Series
Index
Jan.
Percent
Point
Change
NMI/PMI 41.6 42.9 -1.3 Contracting Faster 5 35.8 35.6 +0.2
Business Activity/Production 40.2 44.2 -4.0 Contracting Faster 5 36.3 32.1 +4.2
New Orders 40.7 41.6 -0.9 Contracting Faster 5 33.1 33.2 -0.1
Employment 37.3 34.4 +2.9 Contracting Slower 10 26.1 29.9 -3.8
Supplier Deliveries 48.0 51.5 -3.5 Faster From Slower 1 46.7 45.3 +1.4
Inventories 39.0 41.5 -2.5 Contracting Faster 6 37.0 37.5 -0.5
Prices 48.1 42.5 +5.6 Decreasing Slower 4 29.0 29.0 0.0
Backlog of Orders 36.5 37.5 -1.0 Contracting Faster 7 31.0 29.5 +1.5
New Export Orders 40.0 39.0 +1.0 Contracting Slower 4 37.5 37.5 0.0
Imports 39.0 40.5 -1.5 Contracting Faster 4 32.0 36.5 -4.5
Inventory Sentiment 66.5 62.5 +4.0 Too High Faster 141 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 51.0 55.5 -4.5

* 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

Acetonitrile; Diesel Fuel; #1 Diesel Fuel (2); #2 Diesel Fuel (2); Gasoline* (18); and Pharmacy Products.

Commodities Down in Price

Aluminum; Aluminum Products; Beef (6); Cheese (2); Copper Products (4); Corrugated Boxes (2); Corrugated Products; Electric Transformers; Electrical Products; Gasoline* (8); Polyethylene Films; Pork; Steel Products; and Transportation Costs.

Commodities in Short Supply

Acetonitrile (2) 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.



FEBRUARY 2009 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In February, the NMI registered 41.6 percent indicating contraction in the non-manufacturing sector at a slightly faster rate compared to January's reading of 42.9 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
Feb 2009 41.6 Aug 2008 50.4
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
Average for 12 months – 46.5
High – 51.9
Low – 37.4

Business Activity

ISM's Non-Manufacturing Business Activity Index in February registered 40.2 percent, a decrease of 4 percentage points when compared to the 44.2 percent registered in January. Three industries reported increased business activity, and 14 industries reported decreased activity for the month of February. One industry reported no change from January. Comments from respondents include: "General business activity continues to slow"; and "Capital spending has been severely cut back."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
Feb 2009 18 42 40 40.2
Jan 2009 19 43 38 44.2
Dec 2008 17 40 43 38.9
Nov 2008 9 48 43 33.3

New Orders

ISM's Non-Manufacturing New Orders Index contracted in February for the fifth consecutive month. The index registered 40.7 percent, which is a decrease of 0.9 percentage point from the 41.6 percent registered in January. Comments from respondents include: "Lower sales than anticipated"; "Reduced funding"; and "Overall lack of demand."

The two industries reporting growth of new orders in February are: Real Estate, Rental & Leasing; and Arts, Entertainment & Recreation. The industries reporting contraction of new orders in February — listed in order — are: Wholesale Trade; Other Services; Management of Companies & Support Services; Mining; Accommodation & Food Services; Public Administration; Information; Retail Trade; Transportation & Warehousing; Educational Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; Finance & Insurance; and Utilities.


New Orders
%
Higher
%
Same
%
Lower

Index
Feb 2009 16 47 37 40.7
Jan 2009 15 47 38 41.6
Dec 2008 17 40 43 38.9
Nov 2008 9 52 39 35.6

Employment

Employment activity in the non-manufacturing sector contracted in February for the 13th time in the last 14 months. ISM's Non-Manufacturing Employment Index for February registered 37.3 percent. This reflects an increase of 2.9 percentage points when compared to the 34.4 percent registered in January. Two industries reported increased employment, 14 industries reported decreased employment, and two industries reported unchanged employment for the month of February. Comments from respondents include: "We continue with limited, conservative hiring"; and "Recently reduced the corporate staff."

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


Employment
%
Higher
%
Same
%
Lower

Index
Feb 2009 10 52 38 37.3
Jan 2009 6 53 41 34.4
Dec 2008 9 51 40 34.5
Nov 2008 5 52 43 31.1

Supplier Deliveries

Supplier deliveries were faster in February, with the index registering 48 percent. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in February are: Educational Services; Wholesale Trade; Health Care & Social Assistance; Public Administration; and Transportation & Warehousing. The industries reporting faster supplier deliveries in February are: Real Estate, Rental & Leasing; Mining; Agriculture, Forestry, Fishing & Hunting; Utilities; Professional, Scientific & Technical Services; Finance & Insurance; and Information.


Supplier Deliveries
%
Slower
%
Same
%
Faster

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

Inventories

ISM's Non-Manufacturing Inventories Index registered 39 percent in February, indicating that inventory levels contracted in February for the sixth consecutive month. Of the total respondents in February, 30 percent indicated they do not have inventories or do not measure them. Comments from members include: "Slower business dictates lower inventory levels"; and "Conserve working capital and minimize inventory carrying costs."

The one industry reporting an increase in inventories in February is Mining. The industries reporting decreases in inventories in February — listed in order — are: Transportation & Warehousing; Other Services; Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Public Administration; Arts, Entertainment & Recreation; Utilities; Information; Professional, Scientific & Technical Services; Accommodation & Food Services; Wholesale Trade; and Management of Companies & Support Services.


Inventories
%
Higher
%
Same
%
Lower

Index
Feb 2009 9 60 31 39.0
Jan 2009 16 51 33 41.5
Dec 2008 22 54 24 49.0
Nov 2008 19 54 27 46.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services decreased in February for the fourth consecutive month after 65 consecutive months of increases. ISM's Non-Manufacturing Prices Index for February registered 48.1 percent, 5.6 percentage points higher than the 42.5 percent reported in January. In February, the percentage of respondents reporting higher prices is 18 percent, the percentage indicating no change in prices paid is 57 percent, and 25 percent of the respondents reported lower prices.

In February, four industries reported an increase in prices paid in the following order: Real Estate, Rental & Leasing; Finance & Insurance; Health Care & Social Assistance; and Professional, Scientific & Technical Services. The 11 industries reporting prices as decreasing for the month of February — listed in order — are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Information; Retail Trade; Utilities; Construction; Accommodation & Food Services; Wholesale Trade; Transportation & Warehousing; Public Administration; and Educational Services.


Prices
%
Higher
%
Same
%
Lower

Index
Feb 2009 18 57 25 48.1
Jan 2009 13 55 32 42.5
Dec 2008 9 50 41 36.1
Nov 2008 11 49 40 37.0

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in February for the seventh consecutive month. The index registered 36.5 percent, 1 percentage point lower than the 37.5 percent reported in January. Of the total respondents in February, 43 percent indicated they do not measure backlog of orders.

No industry reported an increase in order backlogs in February. The industries reporting lower backlog of orders in February — listed in order — are: Educational Services; Management of Companies & Support Services; Information; Mining; Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Retail Trade; Transportation & Warehousing; Other Services; Construction; Utilities; Professional, Scientific & Technical Services; and Health Care & Social Assistance.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Feb 2009 3 67 30 36.5
Jan 2009 5 65 30 37.5
Dec 2008 15 55 30 42.5
Nov 2008 10 59 31 39.5

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 February. The New Export Orders Index for February registered 40 percent. This is an increase of 1 percentage point from January's index of 39 percent. Of the total respondents in February, 72 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 February are: Agriculture, Forestry, Fishing & Hunting; and Retail Trade. The industries reporting a decrease in export orders in February — listed in order — are: Educational Services; Management of Companies & Support Services; Utilities; Accommodation & Food Services; Professional, Scientific & Technical Services; Transportation & Warehousing; Wholesale Trade; and Other Services.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
Feb 2009 9 62 29 40.0
Jan 2009 14 50 36 39.0
Dec 2008 14 51 35 39.5
Nov 2008 5 59 36 34.5

Imports

The ISM Non-Manufacturing Imports Index registered 39 percent in February. The index is 1.5 percentage points lower than January's index of 40.5 percent. In February, 59 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 February. The industries reporting a decrease in imports for the month of February are: Wholesale Trade; Transportation & Warehousing; Accommodation & Food Services; Health Care & Social Assistance; Retail Trade; and Utilities.


Imports
%
Higher
%
Same
%
Lower

Index
Feb 2009 2 74 24 39.0
Jan 2009 8 65 27 40.5
Dec 2008 0 65 35 32.5
Nov 2008 4 72 24 40.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index increased 4 percentage points to 66.5 percent in February, indicating that respondents still believe their inventories are too high at this time. In February, 39 percent of respondents said their inventories were too high, 6 percent said their inventories were too low, and 55 percent said their inventories were about right.

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


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Feb 2009 39 55 6 66.5
Jan 2009 31 63 6 62.5
Dec 2008 37 57 6 65.5
Nov 2008 34 62 4 65.0

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 March 2009 data will be released at 10:00 a.m. (ET) on Friday April 3, 2009.


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