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July 2010 Non-Manufacturing ISM Report On Business®

FOR RELEASE: August 4, 2010


Contact: Rose Marie Goupil
ISM, ROB Media Relations
Tempe, Arizona
800/888-6276, Ext. 3015
E-mail: rgoupil@ism.ws


NMI at 54.3%

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 2010.


Business Activity Index at 57.4%
New Orders Index at 56.7%
Employment Index at 50.9%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in July for the seventh 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 54.3 percent in July, 0.5 percentage point higher than the 53.8 percent registered in June, indicating continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index decreased 0.7 percentage point to 57.4 percent, reflecting growth for the eighth consecutive month. The New Orders Index increased 2.3 percentage points to 56.7 percent, and the Employment Index increased 1.2 percentage points to 50.9 percent, reflecting growth after one month of contraction. The Prices Index decreased 1.1 percentage points to 52.7 percent in July, indicating that prices are still increasing but at a slower rate than in June. According to the NMI, 13 non-manufacturing industries reported growth in July. Respondents' comments are mixed. They vary by industry and company, with a tilt toward cautious optimism about business conditions."

INDUSTRY PERFORMANCE (Based on the NMI)

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

WHAT RESPONDENTS ARE SAYING ...
  • "Our business conditions continue to dramatically outpace last year's." (Information)
  • "Although unemployment remains high, consumer attitude has improved and translates into higher activity levels for us." (Arts, Entertainment & Recreation)
  • "Capital funding remains tight." (Accommodation & Food Services)
  • "Concerning forecasts and the instability in markets are continuing our focus on cautiousness." (Retail Trade)
  • "We continue to see signs of improvement and a slow jobless recovery. We are also seeing a one-time windfall of business as a result of the disaster in the Gulf." (Management of Companies & Support Services)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
JULY 2010
  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 54.3 53.8 +0.5 Growing Faster 7 55.5 56.2 -0.7
Business Activity/Production 57.4 58.1 -0.7 Growing Slower 8 57.0 61.4 -4.4
New Orders 56.7 54.4 +2.3 Growing Faster 11 53.5 58.5 -5.0
Employment 50.9 49.7 +1.2 Growing From Contracting 1 58.6 57.8 +0.8
Supplier Deliveries 52.0 53.0 -1.0 Slowing Slower 4 58.3 57.3 +1.0
Inventories 55.5 58.5 -3.0 Growing Slower 4 50.2 45.8 +4.4
Prices 52.7 53.8 -1.1 Increasing Slower 12 57.5 57.0 +0.5
Backlog of Orders 52.0 55.5 -3.5 Growing Slower 3 54.5 57.0 -2.5
New Export Orders 52.0 48.0 +4.0 Growing From Contracting 1 56.5 56.0 +0.5
Imports 48.0 48.0 0.0 Contracting Same 2 52.5 56.5 -4.0
Inventory Sentiment 59.0 59.0 0.0 Too High Same 158 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 39.0 38.0 +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 (4); Cable Products; Carbon Pipe; Coated Groundwood; Corrugated Products (5); #2 Diesel Fuel; Freight Charges; Fuel (7); Gasoline; Labor; Pharmacy Products; and Telecom Products.

Commodities Down in Price

Soy Oil; and Telecom Services.

Commodities in Short Supply

Coated Freesheet; and Coated Groundwood.

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



JULY 2010 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In July, the NMI registered 54.3 percent, indicating continued growth in the non-manufacturing sector for the seventh 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
Jul 2010 54.3 Jan 2010 50.5
Jun 2010 53.8 Dec 2009 49.8
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
Average for 12 months — 52.0
High — 55.4
Low — 48.2
Business Activity

ISM's Non-Manufacturing Business Activity Index in July registered 57.4 percent, a decrease of 0.7 percentage point when compared to the 58.1 percent registered in June. Thirteen industries reported increased business activity, and four industries reported decreased activity for the month of July. One industry reported no change from June. Comments from respondents include: "Seasonal, plus more consumer confidence" and "Economy seems to be recovering."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
Jul 2010 27 57 16 57.4
Jun 2010 35 56 9 58.1
May 2010 38 53 9 61.1
Apr 2010 39 51 10 60.3

New Orders

ISM's Non-Manufacturing New Orders Index grew in July for the 11th consecutive month. The index registered 56.7 percent, which is an increase of 2.3 percentage points from the 54.4 percent reported in June. Comments from respondents include: "Business is up slightly" and "New capital projects."

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


New Orders
%
Higher
%
Same
%
Lower

Index
Jul 2010 29 54 17 56.7
Jun 2010 30 56 14 54.4
May 2010 35 52 13 57.1
Apr 2010 36 53 11 58.2

Employment

Employment activity in the non-manufacturing sector grew in July for second time in the past three months, and the second time since December 2007. ISM's Non-Manufacturing Employment Index for July registered 50.9 percent. This reflects an increase of 1.2 percentage points when compared to the 49.7 percent registered in June. Nine industries reported increased employment, four industries reported decreased employment, and five industries reported unchanged employment compared to June. Comments from respondents include: "Project team additions"; "Increased demand for services"; and "Expanding scope of business."

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


Employment
%
Higher
%
Same
%
Lower

Index
Jul 2010 17 73 10 50.9
Jun 2010 18 70 12 49.7
May 2010 22 65 13 50.4
Apr 2010 22 61 17 49.5

Supplier Deliveries

The Supplier Deliveries Index registered 52 percent in July, 1 percentage point lower than the 53 percent registered in June, indicating that supplier deliveries continued to slow in July. A reading above 50 percent indicates slower deliveries.

The four industries reporting slower deliveries in July are: Mining; Construction; Wholesale Trade; and Transportation & Warehousing. The only industry reporting faster supplier deliveries in July is Accommodation & Food Services.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Jul 2010 9 86 5 52.0
Jun 2010 10 86 4 53.0
May 2010 10 86 4 53.0
Apr 2010 13 81 6 53.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 55.5 percent in July, indicating that inventory levels grew in July for the fourth consecutive month. Of the total respondents in July, 28 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Better oversight of inventory by staff"; "Working inventory down"; and "Problems securing credit to purchase inventory."

The 11 industries reporting an increase in inventories in July — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Mining; Other Services; Utilities; Information; Health Care & Social Assistance; Retail Trade; Accommodation & Food Services; Wholesale Trade; and Professional, Scientific & Technical Services. The six industries reporting decreases in inventories in July — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Construction; Finance & Insurance; Public Administration; and Management of Companies & Support Services.


Inventories
%
Higher
%
Same
%
Lower

Index
Jul 2010 27 57 16 55.5
Jun 2010 26 65 9 58.5
May 2010 32 61 7 62.5
Apr 2010 26 57 17 54.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in July, but at a slower rate than in June. ISM's Non-Manufacturing Prices Index for July registered 52.7 percent, 1.1 percentage points lower than the 53.8 percent reported in June. In July, the percentage of respondents reporting higher prices is 21 percent, the percentage indicating no change in prices paid is 71 percent, and 8 percent of the respondents reported lower prices.

In July, nine industries reported an increase in prices paid, in the following order: Construction; Accommodation & Food Services; Transportation & Warehousing; Professional, Scientific & Technical Services; Utilities; Health Care & Social Assistance; Retail Trade; Information; and Public Administration. The four industries reporting prices as decreasing for the month of July are: Management of Companies & Support Services; Mining; Wholesale Trade; and Finance & Insurance.


Prices
%
Higher
%
Same
%
Lower

Index
Jul 2010 21 71 8 52.7
Jun 2010 27 64 9 53.8
May 2010 35 60 5 60.6
Apr 2010 42 56 2 64.7

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew in July for the third consecutive month. The index registered 52 percent, 3.5 percentage points lower than the 55.5 percent reported in June. Of the total respondents in July, 47 percent indicated they do not measure backlog of orders.

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


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Jul 2010 13 78 9 52.0
Jun 2010 20 71 9 55.5
May 2010 18 76 6 56.0
Apr 2010 18 63 19 49.5

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 July after one month of contraction. The New Export Orders Index for July registered 52 percent, which is 4 percentage points higher than the 48 percent registered in June. Of the total respondents in July, 69 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 July are: Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Transportation & Warehousing; and Information. The three industries reporting a decrease in export orders in July are: Mining; Agriculture, Forestry, Fishing & Hunting; and Wholesale Trade.


New Export Orders
%
Higher
%
Same
%
Lower

Index
Jul 2010 15 74 11 52.0
Jun 2010 11 74 15 48.0
May 2010 19 69 12 53.5
Apr 2010 17 80 3 57.0

Imports

The ISM Non-Manufacturing Imports Index contracted for the second consecutive month in July. The index registered 48 percent, which is the same percentage reported in June. In July, 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 July are: Arts, Entertainment & Recreation; Other Services; and Accommodation & Food Services. The five industries reporting a decrease in imports for the month of July are: Educational Services; Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Retail Trade; and Wholesale Trade.


Imports
%
Higher
%
Same
%
Lower

Index
Jul 2010 8 80 12 48.0
Jun 2010 7 82 11 48.0
May 2010 15 83 2 56.5
Apr 2010 15 83 2 56.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in July registered 59 percent. This is the same percentage reported in June, indicating that respondents believe their inventories are too high at this time. In July, 27 percent of respondents said their inventories were too high, 9 percent said their inventories were too low, and 64 percent said their inventories were about right.

The nine industries reporting a feeling that their inventories are too high in July — listed in order — are: Finance & Insurance; Management of Companies & Support Services; Mining; Arts, Entertainment & Recreation; Accommodation & Food Services; Professional, Scientific & Technical Services; Information; Health Care & Social Assistance; and Wholesale Trade. The two industries reporting that inventories are too low in July are: Transportation & Warehousing; and Agriculture, Forestry, Fishing & Hunting.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Jul 2010 27 64 9 59.0
Jun 2010 25 68 7 59.0
May 2010 27 67 6 60.5
Apr 2010 15 77 8 53.5

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 2010 data will be released at 10:00 a.m. (ET) on Friday, September 3, 2010.


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