March 2009 Non-Manufacturing ISM Report On Business®

FOR RELEASE: April 3, 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 40.8%

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 March 2009.


Business Activity Index at 44.1%
New Orders Index at 38.8%
Employment Index at 32.3%
Some Industries Expect to Benefit From Economic Stimulus Package

(Tempe, Arizona) — Economic activity in the non-manufacturing sector contracted in March, 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 40.8 percent in March, 0.8 percentage point lower than the 41.6 percent registered in February, indicating contraction in the non-manufacturing sector for the sixth consecutive month at a slightly faster rate. The Non-Manufacturing Business Activity Index increased 3.9 percentage points to 44.1 percent. The New Orders Index decreased 1.9 percentage points to 38.8 percent, and the Employment Index decreased 5 percentage points to 32.3 percent. The Prices Index decreased 9 percentage points to 39.1 percent in March, indicating a faster decrease in prices from February. According to the NMI, one non-manufacturing industry reported growth in March. Respondents remain concerned about the negative economic outlook and rising unemployment. A special question was asked with regard to the Economic Stimulus Package, and eight of the 18 industries expect to derive some benefit from the stimulus." (See Special Questions section at the end of this release for more information.)

INDUSTRY PERFORMANCE (Based on the NMI)

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

WHAT RESPONDENTS ARE SAYING ...
  • "We are definitely feeling the recession in terms of business activity on all fronts." (Transportation & Warehousing)
  • "The general state of the building industry is still very difficult with demand still low. We are starting to see some inflation in commodities and expect to have limited sales for this month." (Construction)
  • "Business is significantly down. Very few new projects. Many layoffs." (Finance & Insurance)
  • "Healthcare is also seeing a slowdown in volume." (Health Care & Social Assistance)
  • "Business is still flat and appears like it will remain that way through the second quarter of this year, causing cutbacks on purchases and increased requests for cost savings." (Professional, Scientific & Technical Services)
  • "Things are still slow due to the current economic conditions. Areas that are traditionally active this time of year are experiencing moderate activity levels." (Wholesale Trade)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
MARCH 2009
  Non-Manufacturing Manufacturing
Index Series
Index
Mar.
Series
Index
Feb.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Mar.
Series
Index
Feb.
Percent
Point
Change
NMI/PMI 40.8 41.6 -0.8 Contracting Faster 6 36.3 35.8 +0.5
Business Activity/Production 44.1 40.2 +3.9 Contracting Slower 6 36.4 36.3 +0.1
New Orders 38.8 40.7 -1.9 Contracting Faster 6 41.2 33.1 +8.1
Employment 32.3 37.3 -5.0 Contracting Faster 11 28.1 26.1 +2.0
Supplier Deliveries 48.0 48.0 0.0 Faster Same 2 43.6 46.7 -3.1
Inventories 40.0 39.0 +1.0 Contracting Slower 7 32.2 37.0 -4.8
Prices 39.1 48.1 -9.0 Decreasing Faster 5 31.0 29.0 +2.0
Backlog of Orders 41.0 36.5 +4.5 Contracting Slower 8 35.5 31.0 +4.5
New Export Orders 39.0 40.0 -1.0 Contracting Faster 5 39.0 37.5 +1.5
Imports 37.0 39.0 -2.0 Contracting Faster 5 33.0 32.0 +1.0
Inventory Sentiment 60.0 66.5 -6.5 Too High Slower 142 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 54.0 51.0 +3.0

* 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

Fuel; Gasoline (19); IT Contractors; Plastic Resins; Shingles; and Transportation Costs.

Commodities Down in Price

Aluminum (2); Beef (7); Cellular Phone Service; Cheese (3); Coated Ground Wood; Computers/Laptops; Construction Services; Copper Products (5); Corrugated Boxes (3); Corrugated Products (2); #2 Diesel Fuel; Milk; Natural Gas; Plastic Bags; Polyethylene Films; Poly Products; PVC Pipe & Fittings; Stainless Steel; and Steel.

Commodities in Short Supply

Acetonitrile (3) is the only commodity reported in short supply.

Note: The number of consecutive months the commodity is listed is indicated after each item.



MARCH 2009 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In March, the NMI registered 40.8 percent indicating contraction in the non-manufacturing sector at a slightly faster rate compared to February's reading of 41.6 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
Mar 2009 40.8 Sep 2008 50.0
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
Average for 12 months — 45.8
High — 51.9
Low — 37.4

Business Activity

ISM's Non-Manufacturing Business Activity Index in March registered 44.1 percent, an increase of 3.9 percentage points when compared to the 40.2 percent registered in February. Four industries reported increased business activity, and 8 industries reported decreased activity for the month of March. Six industries reported no change from February. Comments from respondents include: "No one is spending"; "Severe slowdown in new business"; and "Weak economy, projects on hold."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
Mar 2009 24 44 32 44.1
Feb 2009 18 42 40 40.2
Jan 2009 19 43 38 44.2
Dec 2008 17 40 43 38.9

New Orders

ISM's Non-Manufacturing New Orders Index contracted in March for the sixth consecutive month. The index registered 38.8 percent, which is a decrease of 1.9 percentage points from the 40.7 percent registered in February. Comments from respondents include: "Economy is forcing serious budget restraints"; "Customer requirements are not meeting forecasted anticipation"; and "Capital purchases have been curtailed."

The one industry reporting growth of new orders in March is Real Estate, Rental & Leasing. The 14 industries reporting contraction of new orders in March — listed in order — are: Wholesale Trade; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Information; Educational Services; Professional, Scientific & Technical Services; Other Services; Transportation & Warehousing; Public Administration; Retail Trade; Health Care & Social Assistance; Accommodation & Food Services; Arts, Entertainment & Recreation; and Finance & Insurance.


New Orders
%
Higher
%
Same
%
Lower

Index
Mar 2009 18 42 40 38.8
Feb 2009 16 47 37 40.7
Jan 2009 15 47 38 41.6
Dec 2008 17 40 43 38.9

Employment

Employment activity in the non-manufacturing sector contracted in March for the 14th time in the last 15 months. ISM's Non-Manufacturing Employment Index for March registered 32.3 percent. This reflects a decrease of 5 percentage points when compared to the 37.3 percent registered in February. One industry reported increased employment, 14 industries reported decreased employment, and three industries reported unchanged employment for the month of March. Comments from respondents include: "Significant RIF [reduction in force] activity" and "Tightening up staff replacement processes due to lower volume."

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


Employment
%
Higher
%
Same
%
Lower

Index
Mar 2009 7 50 43 32.3
Feb 2009 10 52 38 37.3
Jan 2009 6 53 41 34.4
Dec 2008 9 51 40 34.5

Supplier Deliveries

Supplier deliveries were faster in March, with the index registering 48 percent, the same as last month. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in March are: Information; Construction; Finance & Insurance; and Educational Services. The industries reporting faster supplier deliveries in March are: Utilities; Mining; Wholesale Trade; Professional, Scientific & Technical Services; and Transportation & Warehousing.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Mar 2009 7 82 11 48.0
Feb 2009 8 80 12 48.0
Jan 2009 10 83 7 51.5
Dec 2008 8 80 12 48.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 40 percent in March, indicating that inventory levels contracted in March for the seventh consecutive month. Of the total respondents in March, 28 percent indicated they do not have inventories or do not measure them. Comments from members include: "Working down existing inventory"; "Keeping lower levels on hand, decreased on-hand levels by a one-month supply"; and "Continue to reduce inventory levels."

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


Inventories
%
Higher
%
Same
%
Lower

Index
Mar 2009 9 62 29 40.0
Feb 2009 9 60 31 39.0
Jan 2009 16 51 33 41.5
Dec 2008 22 54 24 49.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services decreased in March for the fifth consecutive month after 65 consecutive months of increases. ISM's Non-Manufacturing Prices Index for March registered 39.1 percent, 9 percentage points lower than the 48.1 percent reported in February. In March, the percentage of respondents reporting higher prices is 12 percent, the percentage indicating no change in prices paid is 59 percent, and 29 percent of the respondents reported lower prices.

In March, two industries reported an increase in prices paid in the following order: Arts, Entertainment & Recreation; and Health Care & Social Assistance. The 12 industries reporting prices as decreasing for the month of March — listed in order — are: Mining; Transportation & Warehousing; Accommodation & Food Services; Information; Retail Trade; Management of Companies & Support Services; Construction; Utilities; Wholesale Trade; Professional, Scientific & Technical Services; Educational Services; and Finance & Insurance.


Prices
%
Higher
%
Same
%
Lower

Index
Mar 2009 12 59 29 39.1
Feb 2009 18 57 25 48.1
Jan 2009 13 55 32 42.5
Dec 2008 9 50 41 36.1

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in March for the eighth consecutive month. The index registered 41 percent, 4.5 percentage points higher than the 36.5 percent reported in February. Of the total respondents in March, 44 percent indicated they do not measure backlog of orders.

Three industries reported an increase in order backlogs in March: Educational Services; Professional, Scientific & Technical Services; and Public Administration. The industries reporting lower backlog of orders in March — listed in order — are: Utilities; Retail Trade; Information; Wholesale Trade; Health Care & Social Assistance; Other Services; Transportation & Warehousing; and Construction.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Mar 2009 6 70 24 41.0
Feb 2009 3 67 30 36.5
Jan 2009 5 65 30 37.5
Dec 2008 15 55 30 42.5

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 March. The New Export Orders Index for March registered 39 percent. This is a decrease of 1 percentage point from February's index of 40 percent. Of the total respondents in March, 69 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 March is Professional, Scientific & Technical Services. The industries reporting a decrease in export orders in March — listed in order — are: Finance & Insurance; Wholesale Trade; Transportation & Warehousing; Accommodation & Food Services; and Retail Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
Mar 2009 5 68 27 39.0
Feb 2009 9 62 29 40.0
Jan 2009 14 50 36 39.0
Dec 2008 14 51 35 39.5

Imports

The ISM Non-Manufacturing Imports Index registered 37 percent in March. The index is 2 percentage points lower than February's index of 39 percent. In March, 61 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 March. The industries reporting a decrease in imports for the month of March are: Wholesale Trade; Finance & Insurance; Transportation & Warehousing; Other Services; Retail Trade; and Health Care & Social Assistance.


Imports
%
Higher
%
Same
%
Lower

Index
Mar 2009 0 74 26 37.0
Feb 2009 2 74 24 39.0
Jan 2009 8 65 27 40.5
Dec 2008 0 65 35 32.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index decreased 6.5 percentage points to 60 percent in March, indicating that respondents still believe their inventories are too high at this time. In March, 30 percent of respondents said their inventories were too high, 10 percent said their inventories were too low, and 60 percent said their inventories were about right.

The industries reporting a feeling that their inventories are too high in March are: Utilities; Other Services; Construction; Accommodation & Food Services; Wholesale Trade; Finance & Insurance; Professional, Scientific & Technical Services; Health Care & Social Assistance; and Retail Trade. The industries reporting that their inventories are too low are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Transportation & Warehousing; Public Administration; and Information.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Mar 2009 30 60 10 60.0
Feb 2009 39 55 6 66.5
Jan 2009 31 63 6 62.5
Dec 2008 37 57 6 65.5

Special Questions — March

Survey respondents were asked special questions designed to learn more about expectations regarding the Economic Stimulus Package. The questions were structured to determine if respondents believed that their industry and organization will benefit from the program as they understand it.

Of all respondents, 52 percent indicate that their industry will benefit. The industries with a majority of respondents indicating that they expect to benefit are: Real Estate, Rental & Leasing; Public Administration; Educational Services; Utilities; Finance & Insurance; Construction; Health Care & Social Assistance; and Professional, Scientific & Technical Services.

Forty-six percent of respondents indicate that their company will benefit from the stimulus package. The industries with a majority of respondents indicating that they expect their company will benefit are: Real Estate, Rental & Leasing; Public Administration; Educational Services; Construction; and Utilities.

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; 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 April 2009 data will be released at 10:00 a.m. (ET) on Tuesday, May 5, 2009.


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