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July 2009 Non-Manufacturing ISM Report On Business®

FOR RELEASE: August 5, 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 46.4%

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 July 2009.


Business Activity Index at 46.1%
New Orders Index at 48.1%
Employment Index at 41.5%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector contracted in July, 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 46.4 percent in July, 0.6 percentage point lower than the 47 percent registered in June, indicating contraction in the non-manufacturing sector for the 10th consecutive month, at a slightly faster rate. The Non-Manufacturing Business Activity Index decreased 3.7 percentage points to 46.1 percent. The New Orders Index decreased 0.5 percentage point to 48.1 percent, and the Employment Index decreased 1.9 percentage points to 41.5 percent. The Prices Index decreased 12.4 percentage points to 41.3 percent in July, indicating a significant decrease in prices paid from June. According to the NMI, seven non-manufacturing industries reported growth in July. The majority of respondents' comments reflect a sense of uncertainty and cautiousness about business conditions."

INDUSTRY PERFORMANCE (Based on the NMI)

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

WHAT RESPONDENTS ARE SAYING ...
  • "Economic activity continues to decline." (Transportation & Warehousing)
  • "Continued soft sales, offset by improving profit margins." (Accommodation & Food Services)
  • "Stimulus funds have increased business activity." (Public Administration)
  • "Business downturn seems to be stabilizing somewhat." (Information)
  • "There is still downward pressure on our products; however, our sales volume is stabilizing." (Mining)
  • "The past month's volume target and operating volumes were met. Rising concerns over the future form of healthcare reform and impact on provider organizations." (Health Care & Social Assistance)
  • "Although attendance is up, business levels remain steady. More people, fewer dollars spent — an indication that discretionary spending is limited." (Arts, Entertainment & Recreation)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
JULY 2009
  Non-Manufacturing Manufacturing
Index Series
Index
July
Series
Index
June
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
July
Series
Index
June
Percent
Point
Change
NMI/PMI 46.4 47.0 -0.6 Contracting Faster 10 48.9 44.8 +4.1
Business Activity/Production 46.1 49.8 -3.7 Contracting Faster 10 57.9 52.5 +5.4
New Orders 48.1 48.6 -0.5 Contracting Faster 10 55.3 49.2 +6.1
Employment 41.5 43.4 -1.9 Contracting Faster 15 45.6 40.7 +4.9
Supplier Deliveries 50.0 46.0 +4.0 Unchanged From Contracting 1 52.0 50.6 +1.4
Inventories 47.0 45.0 +2.0 Contracting Slower 11 33.5 30.8 +2.7
Prices 41.3 53.7 -12.4 Decreasing From Increasing 1 55.0 50.0 +5.0
Backlog of Orders 42.0 46.0 -4.0 Contracting Faster 12 50.0 47.5 +2.5
New Export Orders 47.5 54.5 -7.0 Contracting From Growing 1 50.5 49.5 +1.0
Imports 45.0 47.0 -2.0 Contracting Faster 9 50.0 46.0 +4.0
Inventory Sentiment 62.5 67.0 -4.5 Too High Slower 146 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 42.5 43.5 -1.0

* 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

Diesel Fuel* (2); Plastic/Poly Bags; and Tomatoes (2).

Commodities Down in Price

Beef (2); Corrugated Boxes; Diesel Fuel*; #2 Diesel Fuel; Fuel; Fuel Surcharges; Gasoline; Medical Supplies; Natural Gas (3); Office Supplies; Paper; Pork Products; and Steel Products.

Commodities in Short Supply

No commodities were reported in short supply.

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.



JULY 2009 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In July, the NMI registered 46.4 percent, indicating contraction in the non-manufacturing sector at a faster rate compared to June's reading of 47 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
Jul 2009 46.4 Jan 2009 42.9
Jun 2009 47.0 Dec 2008 40.1
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
Average for 12 months — 44.1
High — 50.4
Low — 37.4

Business Activity

ISM's Non-Manufacturing Business Activity Index in July registered 46.1 percent, a decrease of 3.7 percentage points when compared to the 49.8 percent registered in June. Six industries reported increased business activity, and eight industries reported decreased activity for the month of July. Four industries reported no change from June. Comments from respondents include: "Reductions in revenue and staff" and "Lower customer demand."

The industries reporting growth of business activity in July — listed in order — are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Accommodation & Food Services; Information; Educational Services; and Retail Trade. The industries reporting decreased business activity in July — listed in order — are: Management of Companies & Support Services; Other Services; Wholesale Trade; Public Administration; Finance & Insurance; Utilities; Construction; and Transportation & Warehousing.


Business Activity
%
Higher
%
Same
%
Lower

Index
Jul 2009 19 53 28 46.1
Jun 2009 28 50 22 49.8
May 2009 20 52 28 42.4
Apr 2009 26 46 28 45.2

New Orders

ISM's Non-Manufacturing New Orders Index contracted in July for the 10th consecutive month. The index registered 48.1 percent, which is a decrease of 0.5 percentage point from the 48.6 percent registered in June. Comments from respondents include: "Lower bid opportunities" and "Orders are being placed on hold pending economic recovery."

The seven industries reporting growth of new orders in July — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Utilities; Information; Educational Services; Retail Trade; and Accommodation & Food Services. The seven industries reporting contraction of new orders in July — listed in order — are: Other Services; Professional, Scientific & Technical Services; Construction; Public Administration; Finance & Insurance; Transportation & Warehousing; and Wholesale Trade.


New Orders
%
Higher
%
Same
%
Lower

Index
Jul 2009 22 52 26 48.1
Jun 2009 29 45 26 48.6
May 2009 23 51 26 44.4
Apr 2009 24 54 22 47.0

Employment

Employment activity in the non-manufacturing sector contracted in July for the 18th time in the last 19 months. ISM's Non-Manufacturing Employment Index for July registered 41.5 percent. This reflects a decrease of 1.9 percentage points when compared to the 43.4 percent registered in June. Six industries reported increased employment, 11 industries reported decreased employment, and one industry reported unchanged employment compared to June. Comments from respondents include: "Continued attrition and layoffs due to economic conditions" and "Hiring freeze in place, and we are unable to fill open positions."

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


Employment
%
Higher
%
Same
%
Lower

Index
Jul 2009 13 61 26 41.5
Jun 2009 13 64 23 43.4
May 2009 13 58 29 39.0
Apr 2009 10 58 32 37.0

Supplier Deliveries

The Supplier Deliveries Index registered 50 percent in July, indicating supplier deliveries were unchanged in July when compared to June. A reading at 50 percent indicates an equal balance of non-manufacturing respondents reporting slower and faster deliveries from their suppliers. A reading above 50 percent indicates slower deliveries.

The six industries reporting slower deliveries in July — listed in order — are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Other Services; Construction; Accommodation & Food Services; and Wholesale Trade. The six industries reporting faster supplier deliveries in July — listed in order — are: Mining; Utilities; Educational Services; Public Administration; Professional, Scientific & Technical Services; and Transportation & Warehousing.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Jul 2009 8 84 8 50.0
Jun 2009 3 86 11 46.0
May 2009 7 86 7 50.0
Apr 2009 3 85 12 45.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 47 percent in July, indicating that inventory levels contracted in July for the 11th consecutive month. Of the total respondents in July, 28 percent indicated they do not have inventories or do not measure them. Comments from members include: "Continue to make efforts to reduce inventory" and "No longer replenishing inventories."

The seven industries reporting an increase in inventories in July — listed in order — are: Real Estate, Rental & Leasing; Mining; Utilities; Other Services; Arts, Entertainment & Recreation; Wholesale Trade; and Retail Trade. The six industries reporting decreases in inventories in July — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Transportation & Warehousing; Construction; Accommodation & Food Services; and Public Administration.


Inventories
%
Higher
%
Same
%
Lower

Index
Jul 2009 18 58 24 47.0
Jun 2009 14 62 24 45.0
May 2009 17 60 23 47.0
Apr 2009 12 62 26 43.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services decreased in July after a one-month increase. ISM's Non-Manufacturing Prices Index for July registered 41.3 percent, 12.4 percentage points lower than the 53.7 percent reported in June. In July, the percentage of respondents reporting higher prices is 13 percent, the percentage indicating no change in prices paid is 59 percent, and 28 percent of the respondents reported lower prices.

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


Prices
%
Higher
%
Same
%
Lower

Index
Jul 2009 13 59 28 41.3
Jun 2009 26 60 14 53.7
May 2009 17 68 15 46.9
Apr 2009 9 70 21 40.0

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in July for the 12th consecutive month. The index registered 42 percent, 4 percentage points lower than the 46 percent reported in June. Of the total respondents in July, 43 percent indicated they do not measure backlog of orders.

The three industries reporting an increase in order backlogs in July are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; and Accommodation & Food Services. The nine industries reporting lower backlog of orders in July — listed in order — are: Construction; Utilities; Management of Companies & Support Services; Professional, Scientific & Technical Services; Transportation & Warehousing; Wholesale Trade; Other Services; Finance & Insurance; and Health Care & Social Assistance.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Jul 2009 10 64 26 42.0
Jun 2009 11 70 19 46.0
May 2009 6 68 26 40.0
Apr 2009 8 72 20 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 July after one month of growth. The New Export Orders Index for July registered 47.5 percent, which is a decrease of 7 percentage points from June's index of 54.5 percent. Of the total respondents in July, 74 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 July are: Utilities; Arts, Entertainment & Recreation; and Accommodation & Food Services. The five industries reporting a decrease in export orders in July are: Wholesale Trade; Transportation & Warehousing; Other Services; Retail Trade; and Professional, Scientific & Technical Services.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
Jul 2009 15 65 20 47.5
Jun 2009 33 43 24 54.5
May 2009 11 72 17 47.0
Apr 2009 12 73 15 48.5

Imports

The ISM Non-Manufacturing Imports Index registered 45 percent in July. The index is 2 percentage points lower than June's index of 47 percent. In July, 59 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The two industries reporting an increase in the use of imports in July are: Arts, Entertainment & Recreation; and Utilities. The five industries reporting a decrease in imports for the month of July are: Accommodation & Food Services; Transportation & Warehousing; Wholesale Trade; Retail Trade; and Other Services.


Imports
%
Higher
%
Same
%
Lower

Index
Jul 2009 8 74 18 45.0
Jun 2009 5 84 11 47.0
May 2009 4 84 12 46.0
Apr 2009 7 83 10 48.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in July registered 62.5 percent. This is 4.5 percentage points lower than the 67 percent reported in June, indicating that respondents still believe their inventories are too high at this time. In July, 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 11 industries reporting a feeling that their inventories are too high in July — listed in order — are: Professional, Scientific & Technical Services; Mining; Wholesale Trade; Finance & Insurance; Construction; Information; Real Estate, Rental & Leasing; Other Services; Retail Trade; Accommodation & Food Services; and Health Care & Social Assistance. The one industry reporting that their inventory is too low in July is Transportation & Warehousing.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Jul 2009 28 69 3 62.5
Jun 2009 38 58 4 67.0
May 2009 28 69 3 62.5
Apr 2009 34 57 9 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; 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 August 2009 data will be released at 10:00 a.m. (ET) on Thursday, September 3, 2009.


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