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May 2010 Non-Manufacturing ISM Report On Business®

FOR RELEASE: June 3, 2010


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 55.4%

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 May 2010.


Business Activity Index at 61.1%
New Orders Index at 57.1%
Employment Index at 50.4%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in May for the fifth 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 Worldwide. "The NMI (Non-Manufacturing Index) registered 55.4 percent in May, the same percentage as registered in both April and March, indicating continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 0.8 percentage point to 61.1 percent, reflecting growth for the sixth consecutive month. The New Orders Index decreased 1.1 percentage points to 57.1 percent, and the Employment Index increased 0.9 percentage point to 50.4 percent, reflecting growth for the first time after 28 consecutive months of contraction. The Prices Index decreased 4.1 percentage points to 60.6 percent in May, indicating that prices are still increasing but at a slower rate than in April. According to the NMI, 16 non-manufacturing industries reported growth in May. Respondents' comments remain mostly positive about current business conditions and the general direction of the economy."

INDUSTRY PERFORMANCE (Based on the NMI)

The 16 industries reporting growth in May based on the NMI composite index — listed in order — are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Mining; Information; Accommodation & Food Services; Wholesale Trade; Retail Trade; Construction; Real Estate, Rental & Leasing; Management of Companies & Support Services; Other Services; Public Administration; Professional, Scientific & Technical Services; Utilities; Transportation & Warehousing; and Finance & Insurance. The two industries reporting contraction in May are: Health Care & Social Assistance and Educational Services.

WHAT RESPONDENTS ARE SAYING ...
  • "Our business continues to grow. We are significantly above last year's pace." (Information)
  • "Business is steady right now — not the normal spring for construction, but improving." (Construction)
  • "Outlook is still generally flat for the remainder of this year, with signs that orders and activity will be picking up." (Professional, Scientific & Technical Services)
  • "Continuing our pattern of cautious optimism. Consumers appear to be coming out of hibernation and willing to spend. We expect that if this trend can remain solid, we'll in turn spend additional dollars to support and drive sales activities." (Retail Trade)
  • "Customers' activity is improving in some parts of the country." (Wholesale Trade)
  • "We continue to 'staff to volume' in order to control labor and supply costs. Census continues to be low." (Health Care & Social Assistance)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
MAY 2010
  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 55.4 55.4 0.0 Growing Same 5 59.7 60.4 -0.7
Business Activity/Production 61.1 60.3 +0.8 Growing Faster 6 66.6 66.9 -0.3
New Orders 57.1 58.2 -1.1 Growing Slower 9 65.7 65.7 0.0
Employment 50.4 49.5 +0.9 Growing From Contracting 1 59.8 58.5 +1.3
Supplier Deliveries 53.0 53.5 -0.5 Slowing Slower 2 61.0 61.3 -0.3
Inventories 62.5 54.5 +8.0 Growing Faster 2 45.6 49.4 -3.8
Prices 60.6 64.7 -4.1 Increasing Slower 10 77.5 78.0 -0.5
Backlog of Orders 56.0 49.5 +6.5 Growing From Contracting 1 59.5 57.5 +2.0
New Export Orders 53.5 57.0 -3.5 Growing Slower 3 62.0 61.0 +1.0
Imports 56.5 56.5 0.0 Growing Same 3 56.5 58.0 -1.5
Inventory Sentiment 60.5 53.5 +7.0 Too High Faster 156 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 32.0 33.0 -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

Beef (2); Brass Fittings; Carbon Pipe (2); Copper; Corrugated Products (3); Cotton Products; Dairy; Diesel Fuel; #2 Diesel Fuel (3); Drywall; Fuel (5); Gasoline (7); Lumber and Wood Products (2); Paper (4); Pharmacy Products; Plastic Film (3); Plastic Products; Plastic Resins; Pork Products; Refrigerant; Seafood; Steel; and Steel Products (4).

Commodities Down in Price

No commodities are reported down in price.

Commodities in Short Supply

No commodities are reported in short supply.

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



MAY 2010 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In May, the NMI registered 55.4 percent, the same percentage as registered in both April and March, indicating continued growth in the non-manufacturing sector for the fifth consecutive month. 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 2010 55.4 Nov 2009 48.4
Apr 2010 55.4 Oct 2009 50.1
Mar 2010 55.4 Sep 2009 50.1
Feb 2010 53.0 Aug 2009 48.2
Jan 2010 50.5 Jul 2009 46.7
Dec 2009 49.8 Jun 2009 46.3
Average for 12 months — 50.8
High — 55.4
Low — 46.3

Business Activity

ISM's Non-Manufacturing Business Activity Index in May registered 61.1 percent, an increase of 0.8 percentage point when compared to the 60.3 percent registered in April. Sixteen industries reported increased business activity, and one industry reported decreased activity for the month of May. One industry reported no change from April. Comments from respondents include: "Slight increase in orders due to aggressive sales and better economic climate" and "Modest pick-ups in business volumes."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
May 2010 38 53 9 61.1
Apr 2010 39 51 10 60.3
Mar 2010 37 50 13 60.0
Feb 2010 23 57 20 54.8

New Orders

ISM's Non-Manufacturing New Orders Index grew in May for the ninth consecutive month. The index registered 57.1 percent, which is a decrease of 1.1 percentage points from the 58.2 percent reported in April. Comments from respondents include: "New customers ordering more" and "More clients willing to hire."

The 16 industries reporting growth of new orders in May — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Mining; Information; Construction; Accommodation & Food Services; Management of Companies & Support Services; Educational Services; Public Administration; Utilities; Transportation & Warehousing; Professional, Scientific & Technical Services; Retail Trade; Wholesale Trade; and Finance & Insurance. The only industry reporting contraction of new orders in May is Health Care & Social Assistance.


New Orders
%
Higher
%
Same
%
Lower

Index
May 2010 35 52 13 57.1
Apr 2010 36 53 11 58.2
Mar 2010 37 49 14 62.3
Feb 2010 23 59 18 55.0

Employment

Employment activity in the non-manufacturing sector grew for the first time in 28 months in May. ISM's Non-Manufacturing Employment Index for May registered 50.4 percent. This reflects an increase of 0.9 percentage point when compared to the 49.5 percent registered in April. Ten industries reported increased employment, four industries reported decreased employment, and three industries reported unchanged employment compared to April. Comments from respondents include: "Adding headcount" and "More job orders have come in."

The industries reporting an increase in employment in May — listed in order — are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Mining; Retail Trade; Wholesale Trade; Information; Other Services; Finance & Insurance; Professional, Scientific & Technical Services; and Accommodation & Food Services. The industries reporting a reduction in employment in May are: Educational Services; Transportation & Warehousing; Health Care & Social Assistance; and Public Administration.


Employment
%
Higher
%
Same
%
Lower

Index
May 2010 22 65 13 50.4
Apr 2010 22 61 17 49.5
Mar 2010 16 65 19 49.8
Feb 2010 12 68 20 48.6

Supplier Deliveries

The Supplier Deliveries Index registered 53 percent in May, indicating supplier deliveries were slower in May, but at a slightly slower rate when compared to April. A reading above 50 percent indicates slower deliveries.

The eight industries reporting slower deliveries in May — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Mining; Wholesale Trade; Other Services; Construction; Retail Trade; Accommodation & Food Services; and Information. The two industries reporting faster supplier deliveries in May are: Educational Services and Finance & Insurance.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
May 2010 10 86 4 53.0
Apr 2010 13 81 6 53.5
Mar 2010 8 83 9 49.5
Feb 2010 12 83 5 53.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 62.5 percent in May, indicating that inventory levels grew in May for the second consecutive month. Of the total respondents in May, 34 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Stocking up in advance of price increase" and "Inventory purchases for new facility."

The 12 industries reporting an increase in inventories in May — listed in order — are: Real Estate, Rental & Leasing; Other Services; Wholesale Trade; Utilities; Accommodation & Food Services; Construction; Information; Arts, Entertainment & Recreation; Transportation & Warehousing; Professional, Scientific & Technical Services; Public Administration; and Health Care & Social Assistance. The three industries reporting decreases in inventories in May are: Mining; Agriculture, Forestry, Fishing & Hunting; and Retail Trade.


Inventories
%
Higher
%
Same
%
Lower

Index
May 2010 32 61 7 62.5
Apr 2010 26 57 17 54.5
Mar 2010 21 51 28 46.5
Feb 2010 14 62 24 45.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in May. ISM's Non-Manufacturing Prices Index for May registered 60.6 percent, 4.1 percentage points lower than the 64.7 percent reported in April. In May, the percentage of respondents reporting higher prices is 35 percent, the percentage indicating no change in prices paid is 60 percent, and 5 percent of the respondents reported lower prices.

In May, 15 industries reported an increase in prices paid, in the following order: Agriculture, Forestry, Fishing & Hunting; Construction; Management of Companies & Support Services; Mining; Wholesale Trade; Other Services; Utilities; Accommodation & Food Services; Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Retail Trade; Finance & Insurance; Information; Transportation & Warehousing; and Health Care & Social Assistance. The two industries reporting prices as decreasing for the month of May are: Public Administration and Educational Services.


Prices
%
Higher
%
Same
%
Lower

Index
May 2010 35 60 5 60.6
Apr 2010 42 56 2 64.7
Mar 2010 32 63 5 62.9
Feb 2010 21 73 6 60.4

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew in May after one month of contraction. The index registered 56 percent, 6.5 percentage points higher than the 49.5 percent reported in April. Of the total respondents in May, 44 percent indicated they do not measure backlog of orders.

The nine industries reporting an increase in order backlogs in May — listed in order — are: Utilities; Management of Companies & Support Services; Educational Services; Other Services; Wholesale Trade; Construction; Accommodation & Food Services; Public Administration; and Finance & Insurance. The two industries reporting lower backlog of orders in May are: Professional, Scientific & Technical Services; and Transportation & Warehousing.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
May 2010 18 76 6 56.0
Apr 2010 18 63 19 49.5
Mar 2010 22 67 11 55.5
Feb 2010 10 72 18 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 grew in May for the third consecutive month. The New Export Orders Index for May registered 53.5 percent, which is 3.5 percentage points lower than the 57 percent registered in April. Of the total respondents in May, 73 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 May are: Construction; Information; and Arts, Entertainment & Recreation. The two industries reporting a decrease in export orders in May are: Other Services; and Professional, Scientific & Technical Services.


New Export Orders
%
Higher
%
Same
%
Lower

Index
May 2010 19 69 12 53.5
Apr 2010 17 80 3 57.0
Mar 2010 21 73 6 57.5
Feb 2010 15 64 21 47.0

Imports

The ISM Non-Manufacturing Imports Index registered 56.5 percent in May, the same as in April, and indicating growth for the third consecutive month. In May, 61 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The six industries reporting an increase in the use of imports in May — listed in order — are: Finance & Insurance; Arts, Entertainment & Recreation; Other Services; Wholesale Trade; Retail Trade; and Accommodation & Food Services. The only industry reporting a decrease in imports for the month of May is Mining.


Imports
%
Higher
%
Same
%
Lower

Index
May 2010 15 83 2 56.5
Apr 2010 15 83 2 56.5
Mar 2010 11 80 9 51.0
Feb 2010 11 75 14 48.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in May registered 60.5 percent. This is 7 percentage points higher than the 53.5 percent reported in April, indicating that respondents believe their inventories are too high at this time. In May, 27 percent of respondents said their inventories were too high, 6 percent said their inventories were too low, and 67 percent said their inventories were about right.

The eight industries reporting a feeling that their inventories are too high in May — listed in order — are: Professional, Scientific & Technical Services; Finance & Insurance; Transportation & Warehousing; Information; Accommodation & Food Services; Other Services; Wholesale Trade; and Health Care & Social Assistance. The two industries reporting that inventories are too low in May are: Agriculture, Forestry, Fishing & Hunting; and Retail Trade.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
May 2010 27 67 6 60.5
Apr 2010 15 77 8 53.5
Mar 2010 20 65 15 52.5
Feb 2010 26 68 6 60.0

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 2010 data will be released at 10:00 a.m. (ET) on Tuesday, July 6, 2010.


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