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September 2009 Non-Manufacturing ISM Report On Business®

FOR RELEASE: October 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 50.9%

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 September 2009.


Business Activity Index at 55.1%
New Orders Index at 54.2%
Employment Index at 44.3%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector expanded in September, 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 50.9 percent in September, 2.5 percentage points higher than the 48.4 percent registered in August, indicating growth in the non-manufacturing sector after 11 consecutive months of contraction. The Non-Manufacturing Business Activity Index increased 3.8 percentage points to 55.1 percent. This is the second consecutive month this index has reflected growth since September 2008. The New Orders Index increased 4.3 percentage points to 54.2 percent, and the Employment Index increased 0.8 percentage point to 44.3 percent. The Prices Index decreased 14.3 percentage points to 48.8 percent in September, indicating a significant reversal and decrease in prices paid from August. According to the NMI, five non-manufacturing industries reported growth in September. Even with the overall month-over-month growth reflected in the report this month, respondents' comments vary by industry and remain mixed about business conditions and the overall economy.

This month, we asked a special question with regard to the American Recovery and Reinvestment Act. Fifteen of the 18 non-manufacturing industries expect to derive some benefit from the program, and 14 non-manufacturing industries responded that they expect their companies to see some benefit."

INDUSTRY PERFORMANCE (Based on the NMI)

The five industries reporting growth in September based on the NMI composite index — listed in order — are: Utilities; Health Care & Social Assistance; Retail Trade; Construction; and Wholesale Trade. The 13 industries reporting contraction in September — listed in order — are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Mining; Public Administration; Other Services; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Information; Management of Companies & Support Services; Finance & Insurance; Educational Services; and Transportation & Warehousing.

WHAT RESPONDENTS ARE SAYING ...
  • "Sales are very steady and have risen some each month in the past six months. The bottom is now here." (Construction)
  • "Economic recovery turnaround has begun in the financial services sector; however, cautious expense management is still practiced." (Finance & Insurance)
  • "Lack of capital available for new project development." (Accommodation & Food Services)
  • "Continue to see signs of slow recovery, but customers are still putting orders off until the beginning of 2010." (Professional, Scientific & Technical Services)
  • "Inconsistent ... just when things seem to be settling a bit, a new set of pressures develops." (Retail Trade)
  • "Improvements seen in prices available for natural gas and other fuels." (Educational Services)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
SEPTEMBER 2009
  Non-Manufacturing Manufacturing
Index Series
Index
Sept.
Series
Index
August
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Sept.
Series
Index
August
Percent
Point
Change
NMI/PMI 50.9 48.4 +2.5 Growing From Contracting 1 52.6 52.9 -0.3
Business Activity/Production 55.1 51.3 +3.8 Growing Faster 2 55.7 61.9 -6.2
New Orders 54.2 49.9 +4.3 Growing From Contracting 1 60.8 64.9 -4.1
Employment 44.3 43.5 +0.8 Contracting Slower 17 46.2 46.4 -0.2
Supplier Deliveries 50.0 49.0 +1.0 Unchanged From Faster 1 58.0 57.1 +0.9
Inventories 47.5 43.0 +4.5 Contracting Slower 13 42.5 34.4 +8.1
Prices 48.8 63.1 -14.3 Decreasing From Increasing 1 63.5 65.0 -1.5
Backlog of Orders 51.5 41.0 +10.5 Growing From Contracting 1 53.5 52.5 +1.0
New Export Orders 48.5 54.0 -5.5 Contracting From Growing 1 55.0 55.5 -0.5
Imports 51.5 49.0 +2.5 Growing From Contracting 1 52.0 49.5 +2.5
Inventory Sentiment 62.0 67.5 -5.5 Too High Slower 148 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 39.0 39.0 0.0

* 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

Canned Fruit; Cheese (2); Gasoline* (2); Milk; and Steel Products.

Commodities Down in Price

Gasoline*; and Pork.

Commodities in Short Supply

No commodities were reported in short supply for the third 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.



SEPTEMBER 2009 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In September, the NMI registered 50.9 percent, indicating expansion in the non-manufacturing sector for the first time since August 2008. 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
Sep 2009 50.9 Mar 2009 40.8
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
Average for 12 months — 44.0
High — 50.9
Low — 37.4

Business Activity

ISM's Non-Manufacturing Business Activity Index in September registered 55.1 percent, an increase of 3.8 percentage points when compared to the 51.3 percent registered in August. Eight industries reported increased business activity, and eight industries reported decreased activity for the month of September. Two industries reported no change from August. Comments from respondents include: "More business development activity" and "Increased demand for service."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
Sep 2009 25 56 19 55.1
Aug 2009 28 44 28 51.3
Jul 2009 19 53 28 46.1
Jun 2009 28 50 22 49.8

New Orders

ISM's Non-Manufacturing New Orders Index grew in September after 11 consecutive months of contraction. The index registered 54.2 percent, which is an increase of 4.3 percentage points from the 49.9 percent registered in August. Comments from respondents include: "Increased traffic" and "Promotional activity."

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


New Orders
%
Higher
%
Same
%
Lower

Index
Sep 2009 25 54 21 54.2
Aug 2009 27 46 27 49.9
Jul 2009 22 52 26 48.1
Jun 2009 29 45 26 48.6

Employment

Employment activity in the non-manufacturing sector contracted in September for the 20th time in the last 21 months. ISM's Non-Manufacturing Employment Index for September registered 44.3 percent. This reflects an increase of 0.8 percentage point when compared to the 43.5 percent registered in August. Three industries reported increased employment, 12 industries reported decreased employment, and three industries reported unchanged employment compared to August. Comments from respondents include: "New business needs" and "Positions previously frozen are now approved to be filled."

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


Employment
%
Higher
%
Same
%
Lower

Index
Sep 2009 13 60 27 44.3
Aug 2009 8 68 24 43.5
Jul 2009 13 61 26 41.5
Jun 2009 13 64 23 43.4

Supplier Deliveries

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

The five industries reporting slower deliveries in September are: Utilities; Real Estate, Rental & Leasing; Management of Companies & Support Services; Wholesale Trade; and Professional, Scientific & Technical Services. The four industries reporting faster supplier deliveries in September are: Agriculture, Forestry, Fishing & Hunting; Construction; Educational Services; and Transportation & Warehousing.


Supplier Deliveries
%
Slower
%
Same
%
Faster

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

Inventories

ISM's Non-Manufacturing Inventories Index registered 47.5 percent in September, indicating that inventory levels contracted in September for the 13th consecutive month. Of the total respondents in September, 30 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Higher inventory level due to increased backorders" and "Higher due to reducing delivery frequency."

The seven industries reporting an increase in inventories in September — listed in order — are: Real Estate, Rental & Leasing; Health Care & Social Assistance; Other Services; Utilities; Construction; Finance & Insurance; and Retail Trade. The six industries reporting decreases in inventories in September — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Professional, Scientific & Technical Services; Accommodation & Food Services; Information; and Wholesale Trade.


Inventories
%
Higher
%
Same
%
Lower

Index
Sep 2009 20 55 25 47.5
Aug 2009 9 68 23 43.0
Jul 2009 18 58 24 47.0
Jun 2009 14 62 24 45.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services decreased significantly in September. ISM's Non-Manufacturing Prices Index for September registered 48.8 percent, 14.3 percentage points lower than the 63.1 percent reported in August. In September, the percentage of respondents reporting higher prices is 9 percent, the percentage indicating no change in prices paid is 77 percent, and 14 percent of the respondents reported lower prices.

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


Prices
%
Higher
%
Same
%
Lower

Index
Sep 2009 9 77 14 48.8
Aug 2009 23 71 6 63.1
Jul 2009 13 59 28 41.3
Jun 2009 26 60 14 53.7

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew in September after 13 consecutive months of contraction. The index registered 51.5 percent, 10.5 percentage points higher than the 41 percent reported in August. Of the total respondents in September, 41 percent indicated they do not measure backlog of orders.

The five industries reporting an increase in order backlogs in September are: Construction; Accommodation & Food Services; Finance & Insurance; Health Care & Social Assistance; and Wholesale Trade. The three industries reporting lower backlog of orders in September are: Mining; Professional, Scientific & Technical Services; and Transportation & Warehousing.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Sep 2009 19 65 16 51.5
Aug 2009 11 60 29 41.0
Jul 2009 10 64 26 42.0
Jun 2009 11 70 19 46.0

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 September after one month of growth in August. The New Export Orders Index for September registered 48.5 percent, which is a decrease of 5.5 percentage points from August's index of 54 percent. Of the total respondents in September, 66 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The four industries reporting an increase in new export orders in September are: Mining; Transportation & Warehousing; Accommodation & Food Services; and Professional, Scientific & Technical Services. The three industries reporting a decrease in export orders in September are: Real Estate, Rental & Leasing; Other Services; and Wholesale Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
Sep 2009 14 69 17 48.5
Aug 2009 27 54 19 54.0
Jul 2009 15 65 20 47.5
Jun 2009 33 43 24 54.5

Imports

The ISM Non-Manufacturing Imports Index registered 51.5 percent in September. The index is 2.5 percentage points higher than August's index of 49 percent. In September, 57 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The four industries reporting an increase in the use of imports in September are: Real Estate, Rental & Leasing; Other Services; Information; and Retail Trade. The two industries reporting a decrease in imports for the month of September are: Transportation & Warehousing; and Wholesale Trade.


Imports
%
Higher
%
Same
%
Lower

Index
Sep 2009 9 85 6 51.5
Aug 2009 10 78 12 49.0
Jul 2009 8 74 18 45.0
Jun 2009 5 84 11 47.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in September registered 62 percent. This is 5.5 percentage points lower than the 67.5 percent reported in August, indicating that respondents still believe their inventories are too high at this time. In September, 30 percent of respondents said their inventories were too high, 6 percent said their inventories were too low, and 64 percent said their inventories were about right.

The 10 industries reporting a feeling that their inventories are too high in September — listed in order — are: Mining; Finance & Insurance; Other Services; Wholesale Trade; Professional, Scientific & Technical Services; Management of Companies & Support Services; Accommodation & Food Services; Retail Trade; Information; and Health Care & Social Assistance. The two industries reporting that their inventories are too low in September are: Real Estate, Rental & Leasing; and Transportation & Warehousing.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Sep 2009 30 64 6 62.0
Aug 2009 38 59 3 67.5
Jul 2009 28 69 3 62.5
Jun 2009 38 58 4 67.0

Special Questions — September

Survey respondents were asked special questions designed to learn more about expectations regarding the American Recovery and Reinvestment Act. The questions were structured to determine if respondents believe that their industry and organization will benefit from the program as they understand it.

Of all respondents in September, 44 percent indicate that their industry will benefit. The 15 industries with respondents indicating that they expect to benefit in September — listed in order — are: Public Administration; Educational Services; Finance & Insurance; Professional, Scientific & Technical Services; Wholesale Trade; Construction; Retail Trade; Utilities; Health Care & Social Assistance; Real Estate, Rental & Leasing; Transportation & Warehousing; Accommodation & Food Services; Arts, Entertainment& Recreation; Information; and Other Services.

In September, 44 percent of respondents indicate that their company will benefit from the program. The 14 industries with respondents indicating that their company will benefit — listed in order — are: Public Administration; Educational Services; Construction; Finance & Insurance; Professional, Scientific & Technical Services; Wholesale Trade; Retail Trade; Utilities; Health Care & Social Assistance; Real Estate, Rental & Leasing; Transportation & Warehousing; Accommodation & Food Services; Arts, Entertainment & Recreation; and Information.

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 October 2009 data will be released at 10:00 a.m. (ET) on Wednesday November 4, 2009.


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