May 2009 Non-Manufacturing ISM Report On Business®

FOR RELEASE: June 3, 2009


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


NMI (Non-Manufacturing Index) at 44%

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 May 2009.

Business Activity Index at 42.4%
New Orders Index at 44.4%
Employment Index at 39%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector contracted in May, 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 44 percent in May, 0.3 percentage point higher than the 43.7 percent registered in April, indicating contraction in the non-manufacturing sector for the eighth consecutive month, but at a slightly slower rate. The Non-Manufacturing Business Activity Index decreased 2.8 percentage points to 42.4 percent. The New Orders Index decreased 2.6 percentage points to 44.4 percent, and the Employment Index increased 2 percentage points to 39 percent. The Prices Index increased 6.9 percentage points to 46.9 percent in May, indicating a slower decrease in prices from April. According to the NMI, six non-manufacturing industries reported growth in May. Respondents' comments remain mixed and vary by industry and company. Some respondents indicate that there are signs of stabilization, while others continue to have a negative outlook on the economy."

INDUSTRY PERFORMANCE (Based on the NMI)

The six industries reporting growth in May based on the NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Utilities; Retail Trade; Construction; and Accommodation & Food Services. The 11 industries reporting contraction in May — listed in order — are: Other Services; Mining; Educational Services; Management of Companies & Support Services; Wholesale Trade; Finance & Insurance; Public Administration; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Health Care & Social Assistance; and Information.

WHAT RESPONDENTS ARE SAYING ...
  • "Business remains strong despite the general economy." (Health Care & Social Assistance)
  • "Continued pressures in the financial services industry are driving spending and expense decisions across the sector." (Finance & Insurance)
  • "Our industry is in decline as we lag the general economy." (Other Services)
  • "Business activities are still weak due to the economic conditions in the country." (Wholesale Trade)
  • "Budget constraints continue due to the economy." (Public Administration)
  • "Input costs continue to decline. Supplier lead times are as low as I have ever seen them. Consumers are buying but trading down to lower cost, and for us unfortunately lower margin items." (Agriculture, Forestry, Fishing & Hunting)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
MAY 2009
  Non-Manufacturing Manufacturing
Index Series
Index
May
Series
Index
Apr.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
May
Series
Index
Apr.
Percent
Point
Change
NMI/PMI 44.0 43.7 +0.3 Contracting Slower 8 42.8 40.1 +2.7
Business Activity/Production 42.4 45.2 -2.8 Contracting Faster 8 46.0 40.4 +5.6
New Orders 44.4 47.0 -2.6 Contracting Faster 8 51.1 47.2 +3.9
Employment 39.0 37.0 +2.0 Contracting Slower 13 34.3 34.4 -0.1
Supplier Deliveries 50.0 45.5 +4.5 Unchanged From Faster 1 49.8 44.9 +4.9
Inventories 47.0 43.0 +4.0 Contracting Slower 9 32.9 33.6 -0.7
Prices 46.9 40.0 +6.9 Decreasing Slower 7 43.5 32.0 +11.5
Backlog of Orders 40.0 44.0 -4.0 Contracting Faster 10 48.0 40.5 +7.5
New Export Orders 47.0 48.5 -1.5 Contracting Faster 7 48.0 44.0 +4.0
Imports 46.0 48.5 -2.5 Contracting Faster 7 42.5 42.0 +0.5
Inventory Sentiment 62.5 62.5 0.0 Too High Same 144 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 46.0 49.5 -3.5

* 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

Airfares; Copper Products; Dairy Products; #1 Diesel Fuel; #2 Diesel Fuel; Food & Beverage; Fuel; Gasoline (21); Medical Benefits/Care; Medical/Surgical Supplies; and Office/Computer Supplies.

Commodities Down in Price

Corrugated Products (4); Eggs; Natural Gas; Plastic Pipe/Fittings; Steel Products; Steel Pipe; and Steel Plate.

Commodities in Short Supply

Acetonitrile (5) and Surgical Masks are the only commodities reported in short supply.

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



MAY 2009 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In May, the NMI registered 44 percent, indicating contraction in the non-manufacturing sector at a slower rate compared to April's reading of 43.7 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
May 2009 44.0 Nov 2008 37.4
Apr 2009 43.7 Oct 2008 44.6
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
Average for 12 months — 44.5
High — 50.4
Low — 37.4

Business Activity

ISM's Non-Manufacturing Business Activity Index in May registered 42.4 percent, a decrease of 2.8 percentage points when compared to the 45.2 percent registered in April. Six industries reported increased business activity, and 10 industries reported decreased activity for the month of May. Two industries reported no change from April. Comments from respondents include: "Many initiatives and plans on hold"; and "Delay in start date of new client projects."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
May 2009 20 52 28 42.4
Apr 2009 26 46 28 45.2
Mar 2009 24 44 32 44.1
Feb 2009 18 42 40 40.2

New Orders

ISM's Non-Manufacturing New Orders Index contracted in May for the eighth consecutive month. The index registered 44.4 percent, which is a decrease of 2.6 percentage points from the 47 percent registered in April. Comments from respondents include: "Slower business needs"; "Bids are reduced"; and "Capital purchasing has been curtailed."

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


New Orders
%
Higher
%
Same
%
Lower

Index
May 2009 23 51 26 44.4
Apr 2009 24 54 22 47.0
Mar 2009 18 42 40 38.8
Feb 2009 16 47 37 40.7

Employment

Employment activity in the non-manufacturing sector contracted in May for the 16th time in the last 17 months. ISM's Non-Manufacturing Employment Index for May registered 39 percent. This reflects an increase of 2 percentage points when compared to the 37 percent registered in April. Three industries reported increased employment, 12 industries reported decreased employment, and three industries reported unchanged employment compared to April. Comments from respondents include: "Layoffs and non-replacement of attrition continue to lower overall employee populations"; "Hired some line workers for small increase in business"; and "Properties beginning to add back staff to take care of increased demand."

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


Employment
%
Higher
%
Same
%
Lower

Index
May 2009 13 58 29 39.0
Apr 2009 10 58 32 37.0
Mar 2009 7 50 43 32.3
Feb 2009 10 52 38 37.3

Supplier Deliveries

The Supplier Deliveries Index registered 50 percent in May, indicating no change from April (a reading at 50 percent indicates an equal balance of non-manufacturing respondents reporting slower and faster deliveries from their suppliers). This is 4.5 percentage points more than the 45.5 percent reported in April. A reading above 50 percent indicates slower deliveries.

The four industries reporting slower supplier deliveries in May are: Educational Services; Transportation & Warehousing; Retail Trade; and Public Administration. The three industries reporting faster supplier deliveries in May are: Agriculture, Forestry, Fishing & Hunting; Mining; and Wholesale Trade.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
May 2009 7 86 7 50.0
Apr 2009 3 85 12 45.5
Mar 2009 7 82 11 48.0
Feb 2009 8 80 12 48.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 47 percent in May, indicating that inventory levels contracted in May for the ninth consecutive month. Of the total respondents in May, 26 percent indicated they do not have inventories or do not measure them. Comments from members include: "Reducing number of SKUs"; "Working down existing inventory"; and "Shorter lead times."

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


Inventories
%
Higher
%
Same
%
Lower

Index
May 2009 17 60 23 47.0
Apr 2009 12 62 26 43.0
Mar 2009 9 62 29 40.0
Feb 2009 9 60 31 39.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services decreased in May for the seventh consecutive month after 65 consecutive months of increases. ISM's Non-Manufacturing Prices Index for May registered 46.9 percent, 6.9 percentage points higher than the 40 percent reported in April. In May, the percentage of respondents reporting higher prices is 17 percent, the percentage indicating no change in prices paid is 68 percent, and 15 percent of the respondents reported lower prices.

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


Prices
%
Higher
%
Same
%
Lower

Index
May 2009 17 68 15 46.9
Apr 2009 9 70 21 40.0
Mar 2009 12 59 29 39.1
Feb 2009 18 57 25 48.1

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in May for the 10th consecutive month. The index registered 40 percent, 4 percentage points lower than the 44 percent reported in April. Of the total respondents in May, 44 percent indicated they do not measure backlog of orders.

The only industry reporting an increase in order backlogs in May is Utilities. The 11 industries reporting lower backlog of orders in May — listed in order — are: Educational Services; Management of Companies & Support Services; Other Services; Mining; Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Information; Retail Trade; Professional, Scientific & Technical Services; Finance & Insurance; and Health Care & Social Assistance.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
May 2009 6 68 26 40.0
Apr 2009 8 72 20 44.0
Mar 2009 6 70 24 41.0
Feb 2009 3 67 30 36.5

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 May. The New Export Orders Index for May registered 47 percent. This is a decrease of 1.5 percentage points from April's index of 48.5 percent. Of the total respondents in May, 71 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 May are: Accommodation & Food Services; and Agriculture, Forestry, Fishing & Hunting. The industries reporting a decrease in export orders in May — listed in order — are: Management of Companies & Support Services; Mining; Wholesale Trade; and Other Services.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
May 2009 11 72 17 47.0
Apr 2009 12 73 15 48.5
Mar 2009 5 68 27 39.0
Feb 2009 9 62 29 40.0

Imports

The ISM Non-Manufacturing Imports Index registered 46 percent in May. The index is 2.5 percentage points lower than April's index of 48.5 percent. In May, 59 percent of respondents reported that they do not use, or do not track, the use of imported materials.

Two industries reported an increase in the use of imports in May: Mining; and Accommodation & Food Services. The industries reporting a decrease in imports for the month of May are: Management of Companies & Support Services; and Wholesale Trade.


Imports
%
Higher
%
Same
%
Lower

Index
May 2009 4 84 12 46.0
Apr 2009 7 83 10 48.5
Mar 2009 0 74 26 37.0
Feb 2009 2 74 24 39.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in May registered the same as in April at 62.5 percent, indicating that respondents still believe their inventories are too high at this time. In May, 28 percent of respondents said their inventories were too high, 3 percent said their inventories were too low, and 69 percent said their inventories were about right.

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


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
May 2009 28 69 3 62.5
Apr 2009 34 57 9 62.5
Mar 2009 30 60 10 60.0
Feb 2009 39 55 6 66.5

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; 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 June 2009 data will be released at 10:00 a.m. (ET) on Monday, July 6, 2009.


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