October 2009 Non-Manufacturing ISM Report On Business®

FOR RELEASE: November 4, 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 50.6%

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 October 2009.


Business Activity Index at 55.2%
New Orders Index at 55.6%
Employment Index at 41.1%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector expanded in October for the second consecutive month, 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 50.6 percent in October, 0.3 percentage point lower than the 50.9 percent registered in September, indicating growth in the non-manufacturing sector for the second consecutive month, but at a slightly slower rate. The Non-Manufacturing Business Activity Index increased 0.1 percentage point to 55.2 percent. This is the third consecutive month this index has reflected growth since September 2008. The New Orders Index increased 1.4 percentage points to 55.6 percent, and the Employment Index decreased 3.2 percentage points to 41.1 percent. The Prices Index increased 4.2 percentage points to 53 percent in October, indicating an increase in prices paid from September. According to the NMI, nine non-manufacturing industries reported growth in October. Respondents' comments remain mixed and are mostly cautious about business conditions and the overall economy."

INDUSTRY PERFORMANCE (Based on the NMI)

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

WHAT RESPONDENTS ARE SAYING ...
  • "General economic tone is still 'wait and see.' Capital outlays are postponed for durable goods." (Health Care & Social Assistance)
  • "Cost-cutting efforts continue." (Transportation & Warehousing)
  • "Overall business activity increasing — forecast even better market conditions in the coming months." (Construction)
  • "Business climate remains encouraging, but recovery will remain slow in rebounding." (Professional, Scientific & Technical Services)
  • "The weakening U.S. dollar contributing to upward pressure on commodity prices." (Wholesale Trade)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
OCTOBER 2009
  Non-Manufacturing Manufacturing
Index Series
Index
Oct.
Series
Index
Sept.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Oct.
Series
Index
Sept.
Percent
Point
Change
NMI/PMI 50.6 50.9 -0.3 Growing Slower 2 55.7 52.6 +3.1
Business Activity/Production 55.2 55.1 +0.1 Growing Faster 3 63.3 55.7 +7.6
New Orders 55.6 54.2 +1.4 Growing Faster 2 58.5 60.8 -2.3
Employment 41.1 44.3 -3.2 Contracting Faster 18 53.1 46.2 +6.9
Supplier Deliveries 50.5 50.0 +0.5 Slowing From Unchanged 1 56.9 58.0 -1.1
Inventories 43.0 47.5 -4.5 Contracting Faster 14 46.9 42.5 +4.4
Prices 53.0 48.8 +4.2 Increasing From Decreasing 1 65.0 63.5 +1.5
Backlog of Orders 53.5 51.5 +2.0 Growing Faster 2 53.5 53.5 0.0
New Export Orders 53.5 48.5 +5.0 Growing From Contracting 1 55.5 55.0 +0.5
Imports 46.0 51.5 -5.5 Contracting From Growing 1 51.0 52.0 -1.0
Inventory Sentiment 63.5 62.0 +1.5 Too High Faster 149 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 38.5 39.0 -0.5

* 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

Cheese (3); Fuel; Masks (for TB/H1N1 use); and Stretch Film.

Commodities Down in Price

Alloys; Beef; Chicken; Gasoline (2); Pork (2); and Steel Pipe.

Commodities in Short Supply

Masks (for TB/H1N1 use); and Printer Cartridges.

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



OCTOBER 2009 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In October, the NMI registered 50.6 percent, indicating expansion in the non-manufacturing sector for the second consecutive month 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
Oct 2009 50.6 Apr 2009 43.7
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
Average for 12 months — 44.5
High — 50.9
Low — 37.4

Business Activity

ISM's Non-Manufacturing Business Activity Index in October registered 55.2 percent, an increase of 0.1 percentage point when compared to the 55.1 percent registered in September. Nine industries reported increased business activity, and seven industries reported decreased activity for the month of October. Two industries reported no change from September. Comments from respondents include "New customer requirements" and "New business and new capital projects."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
Oct 2009 25 58 17 55.2
Sep 2009 25 56 19 55.1
Aug 2009 28 44 28 51.3
Jul 2009 19 53 28 46.1

New Orders

ISM's Non-Manufacturing New Orders Index grew in October for the second consecutive month. The index registered 55.6 percent, which is an increase of 1.4 percentage points from the 54.2 percent registered in September. Comments from respondents include: "Some customers have capital budget money to spend before year-end" and "Stocking up on critical supplies."

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


New Orders
%
Higher
%
Same
%
Lower

Index
Oct 2009 25 58 17 55.6
Sep 2009 25 54 21 54.2
Aug 2009 27 46 27 49.9
Jul 2009 22 52 26 48.1

Employment

Employment activity in the non-manufacturing sector contracted in October for the 21st time in the last 22 months. ISM's Non-Manufacturing Employment Index for October registered 41.1 percent. This reflects a decrease of 3.2 percentage points when compared to the 44.3 percent registered in September. Three industries reported increased employment, 12 industries reported decreased employment, and three industries reported unchanged employment compared to September. Comments from respondents include: "Recent reduction in workforce" and "It appears that there is a slowdown in new job postings and [a return to] hiring freezes again."

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


Employment
%
Higher
%
Same
%
Lower

Index
Oct 2009 5 68 27 41.1
Sep 2009 13 60 27 44.3
Aug 2009 8 68 24 43.5
Jul 2009 13 61 26 41.5

Supplier Deliveries

The Supplier Deliveries Index registered 50.5 percent in October, indicating supplier deliveries were slightly slower in October when compared to September. A reading above 50 percent indicates slower deliveries.

The four industries reporting slower deliveries in October are: Utilities; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; and Wholesale Trade. The five industries reporting faster supplier deliveries in October are: Mining; Management of Companies & Support Services; Construction; Transportation & Warehousing; and Finance & Insurance.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Oct 2009 6 89 5 50.5
Sep 2009 8 84 8 50.0
Aug 2009 7 84 9 49.0
Jul 2009 8 84 8 50.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 43 percent in October, indicating that inventory levels contracted in October for the 14th consecutive month. Of the total respondents in October, 29 percent indicated they do not have inventories or do not measure them. Comments from respondents include "Still burning inventory to get in line with run rate" and "Continue to lower inventory to desired level."

The four industries reporting an increase in inventories in October are: Real Estate, Rental & Leasing; Other Services; Information; and Health Care & Social Assistance. The nine industries reporting decreases in inventories in October — listed in order — are: Arts, Entertainment & Recreation; Utilities; Transportation & Warehousing; Wholesale Trade; Public Administration; Accommodation & Food Services; Professional, Scientific & Technical Services; Retail Trade; and Mining.


Inventories
%
Higher
%
Same
%
Lower

Index
Oct 2009 15 56 29 43.0
Sep 2009 20 55 25 47.5
Aug 2009 9 68 23 43.0
Jul 2009 18 58 24 47.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in October. ISM's Non-Manufacturing Prices Index for October registered 53 percent, 4.2 percentage points higher than the 48.8 percent reported in September. In October, the percentage of respondents reporting higher prices is 14 percent, the percentage indicating no change in prices paid is 73 percent, and 13 percent of the respondents reported lower prices.

In October, four industries reported an increase in prices paid, in the following order: Wholesale Trade; Health Care & Social Assistance; Management of Companies & Support Services; and Accommodation and Food Services. The six industries reporting prices as decreasing for the month of October — listed in order — are: Transportation & Warehousing; Other Services; Educational Services; Finance & Insurance; Construction; and Public Administration.


Prices
%
Higher
%
Same
%
Lower

Index
Oct 2009 14 73 13 53.0
Sep 2009 9 77 14 48.8
Aug 2009 23 71 6 63.1
Jul 2009 13 59 28 41.3

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew for the second consecutive month in October. The index registered 53.5 percent, 2 percentage points higher than the 51.5 percent reported in September. Of the total respondents in October, 42 percent indicated they do not measure backlog of orders.

The five industries reporting an increase in order backlogs in October are: Construction; Real Estate, Rental & Leasing; Health Care & Social Assistance; Management of Companies & Support Services; and Retail Trade. The six industries reporting lower backlog of orders in October — listed in order — are: Arts, Entertainment & Recreation; Utilities; Agriculture, Forestry, Fishing & Hunting; Mining; Wholesale Trade; and Other Services.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Oct 2009 19 69 12 53.5
Sep 2009 19 65 16 51.5
Aug 2009 11 60 29 41.0
Jul 2009 10 64 26 42.0

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 October. The New Export Orders Index for October registered 53.5 percent, which is an increase of 5 percentage points from September's index of 48.5 percent. Of the total respondents in October, 69 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 October are: Construction; Management of Companies & Support Services; Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; and Retail Trade. The four industries reporting a decrease in export orders in October are: Information; Other Services; Transportation & Warehousing; and Wholesale Trade.


New Export Orders
%
Higher
%
Same
%
Lower

Index
Oct 2009 18 71 11 53.5
Sep 2009 14 69 17 48.5
Aug 2009 27 54 19 54.0
Jul 2009 15 65 20 47.5

Imports

The ISM Non-Manufacturing Imports Index registered 46 percent, indicating contraction for the month of October. The index is 5.5 percentage points lower than September's index of 51.5 percent. In October, 60 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The one industry reporting an increase in the use of imports in October is Retail Trade. The two industries reporting a decrease in imports for the month of October are: Information and Wholesale Trade.


Imports
%
Higher
%
Same
%
Lower

Index
Oct 2009 2 88 10 46.0
Sep 2009 9 85 6 51.5
Aug 2009 10 78 12 49.0
Jul 2009 8 74 18 45.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in October registered 63.5 percent. This is 1.5 percentage points higher than the 62 percent reported in September, indicating that respondents still believe their inventories are too high at this time. In October, 30 percent of respondents said their inventories were too high, 3 percent said their inventories were too low, and 67 percent said their inventories were about right.

The 13 industries reporting a feeling that their inventories are too high in October — listed in order — are: Other Services; Finance & Insurance; Mining; Real Estate, Rental & Leasing; Management of Companies & Support Services; Information; Accommodation & Food Services; Wholesale Trade; Health Care & Social Assistance; Arts, Entertainment & Recreation; Transportation & Warehousing; Professional, Scientific & Technical Services; and Retail Trade. The one industry reporting that their inventory is too low in October is Public Administration.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Oct 2009 30 67 3 63.5
Sep 2009 30 64 6 62.0
Aug 2009 38 59 3 67.5
Jul 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 November 2009 data will be released at 10:00 a.m. (ET) on Thursday, December 3, 2009.


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