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August 2009 Non-Manufacturing ISM Report On Business®

FOR RELEASE: September 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 48.4%

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 August 2009.


Business Activity Index at 51.3%
New Orders Index at 49.9%
Employment Index at 43.5%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector contracted in August, 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 48.4 percent in August, 2 percentage points higher than the 46.4 percent registered in July, indicating contraction in the non-manufacturing sector for the 11th consecutive month but at a slower rate. The Non-Manufacturing Business Activity Index increased 5.2 percentage points to 51.3 percent. This is the first time this index has reflected growth since September 2008. The New Orders Index increased 1.8 percentage points to 49.9 percent, and the Employment Index increased 2 percentage points to 43.5 percent. The Prices Index increased 21.8 percentage points to 63.1 percent in August, indicating a substantial increase in prices paid from July. According to the NMI, six non-manufacturing industries reported growth in August. Respondents' comments are mixed about business conditions and the overall economy; however, there is an increase in comments indicating that there are signs of improvement going forward."

INDUSTRY PERFORMANCE (Based on the NMI)

The six industries reporting growth in August based on the NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Health Care & Social Assistance; Transportation & Warehousing; Utilities; Accommodation & Food Services; and Information. The 12 industries reporting contraction in August — listed in order — are: Management of Companies & Support Services; Mining; Finance & Insurance; Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Construction; Other Services; Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Educational Services; Public Administration; and Retail Trade.

WHAT RESPONDENTS ARE SAYING ...
  • "While there are promising signs in the economy pointing toward the beginnings of a recovery, the financial services industry continues to be significantly affected by the downturn. Expectations are that the pace will begin to change by Q4 '09." (Finance & Insurance)
  • "Business is still soft due to overall economic conditions." (Wholesale Trade)
  • "There seems to be a more positive feeling about the economy." (Educational Services)
  • "Healthcare reform still has hospitals wondering how they are going to get paid at the end of the day." (Health Care & Social Assistance)
  • "Occupancy shows continued strength for the summer season, still below previous years' averages by 15% to 25%." (Accommodation & Food Services)
  • "Business steady — revenue down slightly; however, less than expected." (Arts, Entertainment & Recreation)
  • "Good first half results. Some evidence of consumers 'trading down.' Supplier lead times are very short." (Agriculture, Forestry, Fishing & Hunting)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
AUGUST 2009
  Non-Manufacturing Manufacturing
Index Series
Index
August
Series
Index
July
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
August
Series
Index
July
Percent
Point
Change
NMI/PMI 48.4 46.4 +2.0 Contracting Slower 11 52.9 48.9 +4.0
Business Activity/Production 51.3 46.1 +5.2 Growing From Contracting 1 61.9 57.9 +4.0
New Orders 49.9 48.1 +1.8 Contracting Slower 11 64.9 55.3 +9.6
Employment 43.5 41.5 +2.0 Contracting Slower 16 46.4 45.6 +0.8
Supplier Deliveries 49.0 50.0 -1.0 Faster From Unchanged 1 57.1 52.0 +5.1
Inventories 43.0 47.0 -4.0 Contracting Faster 12 34.4 33.5 +0.9
Prices 63.1 41.3 +21.8 Increasing From Decreasing 1 65.0 55.0 +10.0
Backlog of Orders 41.0 42.0 -1.0 Contracting Faster 13 52.5 50.0 +2.5
New Export Orders 54.0 47.5 +6.5 Growing From Contracting 1 55.5 50.5 +5.0
Imports 49.0 45.0 +4.0 Contracting Slower 10 49.5 50.0 -0.5
Inventory Sentiment 67.5 62.5 +5.0 Too High Faster 147 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 39.0 42.5 -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*; Beef; Cheese; Copper Wire; #1 Diesel Fuel; #2 Diesel Fuel; Fuel; Gasoline; and Polyethylene Film.

Commodities Down in Price

Airfares*; Juice; Natural Gas (4); and Office Supplies (2).

Commodities in Short Supply

No commodities were reported in short supply for the second consecutive month.

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



AUGUST 2009 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In August, the NMI registered 48.4 percent, indicating contraction in the non-manufacturing sector at a slower rate compared to July's reading of 46.4 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
Aug 2009 48.4 Feb 2009 41.6
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
Average for 12 months — 43.9
High — 50.0
Low — 37.4

Business Activity

ISM's Non-Manufacturing Business Activity Index in August registered 51.3 percent, an increase of 5.2 percentage points when compared to the 46.1 percent registered in July. Seven industries reported increased business activity, and 10 industries reported decreased activity for the month of August. One industry reported no change from July. Comments from respondents include: "New product launch" and "Increased pace of product development activity."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
Aug 2009 28 44 28 51.3
Jul 2009 19 53 28 46.1
Jun 2009 28 50 22 49.8
May 2009 20 52 28 42.4

New Orders

ISM's Non-Manufacturing New Orders Index contracted in August for the 11th consecutive month. The index registered 49.9 percent, which is an increase of 1.8 percentage points from the 48.1 percent registered in July. Comments from respondents include: "Fewer request and needs" and "Departments reducing their spending/budget."

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


New Orders
%
Higher
%
Same
%
Lower

Index
Aug 2009 27 46 27 49.9
Jul 2009 22 52 26 48.1
Jun 2009 29 45 26 48.6
May 2009 23 51 26 44.4

Employment

Employment activity in the non-manufacturing sector contracted in August for the 19th time in the last 20 months. ISM's Non-Manufacturing Employment Index for August registered 43.5 percent. This reflects an increase of 2 percentage points when compared to the 41.5 percent registered in July. Two industries reported increased employment, 12 industries reported decreased employment, and four industries reported unchanged employment compared to July. Comments from respondents include: "Ongoing cost reduction efforts" and "Not refilling vacancies."

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


Employment
%
Higher
%
Same
%
Lower

Index
Aug 2009 8 68 24 43.5
Jul 2009 13 61 26 41.5
Jun 2009 13 64 23 43.4
May 2009 13 58 29 39.0

Supplier Deliveries

The Supplier Deliveries Index registered 49 percent in August, indicating supplier deliveries were faster in August when compared to July. A reading above 50 percent indicates slower deliveries.

The six industries reporting slower deliveries in August — listed in order — are: Utilities; Transportation & Warehousing; Arts, Entertainment & Recreation; Other Services; Accommodation & Food Services; and Wholesale Trade. The five industries reporting faster supplier deliveries in August are: Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Information; Educational Services; and Public Administration.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Aug 2009 7 84 9 49.0
Jul 2009 8 84 8 50.0
Jun 2009 3 86 11 46.0
May 2009 7 86 7 50.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 43 percent in August, indicating that inventory levels contracted in August for the 12th consecutive month. Of the total respondents in August, 30 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Driving managers to reduce and maintain at lower levels" and "Rundown in inventory [in August] due to slow July."

The four industries reporting an increase in inventories in August are: Real Estate, Rental & Leasing; Utilities; Finance & Insurance; and Health Care & Social Assistance. The 10 industries reporting decreases in inventories in August — listed in order — are: Professional, Scientific & Technical Services; Other Services; Arts, Entertainment & Recreation; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Information; Wholesale Trade; Retail Trade; Accommodation & Food Services; and Transportation & Warehousing.


Inventories
%
Higher
%
Same
%
Lower

Index
Aug 2009 9 68 23 43.0
Jul 2009 18 58 24 47.0
Jun 2009 14 62 24 45.0
May 2009 17 60 23 47.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased significantly in August. ISM's Non-Manufacturing Prices Index for August registered 63.1 percent, 21.8 percentage points higher than the 41.3 percent reported in July. In August, the percentage of respondents reporting higher prices is 23 percent, the percentage indicating no change in prices paid is 71 percent, and 6 percent of the respondents reported lower prices.

In August, 13 industries reported an increase in prices paid, in the following order: Management of Companies & Support Services; Retail Trade; Wholesale Trade; Utilities; Transportation & Warehousing; Health Care & Social Assistance; Arts, Entertainment & Recreation; Construction; Educational Services; Information; Accommodation & Food Services; Professional, Scientific & Technical Services; and Public Administration. The three industries reporting prices as decreasing for the month of August are: Mining; Agriculture, Forestry, Fishing & Hunting; and Finance & Insurance.


Prices
%
Higher
%
Same
%
Lower

Index
Aug 2009 23 71 6 63.1
Jul 2009 13 59 28 41.3
Jun 2009 26 60 14 53.7
May 2009 17 68 15 46.9

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in August for the 13th consecutive month. The index registered 41 percent, 1 percentage point lower than the 42 percent reported in July. Of the total respondents in August, 42 percent indicated they do not measure backlog of orders.

The four industries reporting an increase in order backlogs in August are: Educational Services; Real Estate, Rental & Leasing; Transportation & Warehousing; and Accommodation & Food Services. The 11 industries reporting lower backlog of orders in August — listed in order — are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Other Services; Utilities; Mining; Professional, Scientific & Technical Services; Wholesale Trade; Public Administration; Retail Trade; Finance & Insurance; and Health Care & Social Assistance.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Aug 2009 11 60 29 41.0
Jul 2009 10 64 26 42.0
Jun 2009 11 70 19 46.0
May 2009 6 68 26 40.0

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 grew in August. The New Export Orders Index for August registered 54 percent, which is an increase of 6.5 percentage points from July's index of 47.5 percent. Of the total respondents in August, 70 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The five industries reporting an increase in new export orders in August are: Construction; Information; Real Estate, Rental & Leasing; Retail Trade; and Accommodation & Food Services. The four industries reporting a decrease in export orders in August are: Arts, Entertainment & Recreation; Other Services; Professional, Scientific & Technical Services; and Wholesale Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
Aug 2009 27 54 19 54.0
Jul 2009 15 65 20 47.5
Jun 2009 33 43 24 54.5
May 2009 11 72 17 47.0

Imports

The ISM Non-Manufacturing Imports Index registered 49 percent in August. The index is 4 percentage points higher than July's index of 45 percent. In August, 61 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The three industries reporting an increase in the use of imports in August are: Educational Services; Retail Trade; and Accommodation & Food Services. The three industries reporting a decrease in imports for the month of August are: Information; Agriculture, Forestry, Fishing & Hunting; and Wholesale Trade.


Imports
%
Higher
%
Same
%
Lower

Index
Aug 2009 10 78 12 49.0
Jul 2009 8 74 18 45.0
Jun 2009 5 84 11 47.0
May 2009 4 84 12 46.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in August registered 67.5 percent. This is 5 percentage points higher than the 62.5 percent reported in July, indicating that respondents still believe their inventories are too high at this time. In August, 38 percent of respondents said their inventories were too high, 3 percent said their inventories were too low, and 59 percent said their inventories were about right.

The 12 industries reporting a feeling that their inventories are too high in August — listed in order — are: Mining; Other Services; Information; Accommodation & Food Services; Real Estate, Rental & Leasing; Management of Companies & Support Services; Arts, Entertainment & Recreation; Wholesale Trade; Construction; Finance & Insurance; Professional, Scientific & Technical Services; and Retail Trade. No industry reported that their inventory was too low in August.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Aug 2009 38 59 3 67.5
Jul 2009 28 69 3 62.5
Jun 2009 38 58 4 67.0
May 2009 28 69 3 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 September 2009 data will be released at 10:00 a.m. (ET) on Monday, October 5, 2009.


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