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August 2010 Non-Manufacturing ISM Report On Business®

FOR RELEASE: September 3, 2010


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


NMI at 51.5%

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 2010.


Business Activity Index at 54.4%
New Orders Index at 52.4%
Employment Index at 48.2%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in August for the eighth 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 51.5 percent in August, 2.8 percentage points lower than the 54.3 percent registered in July, indicating continued growth in the non-manufacturing sector but at a slower rate. The Non-Manufacturing Business Activity Index decreased 3 percentage points to 54.4 percent, reflecting growth for the ninth consecutive month, but at a slower rate than in July. The New Orders Index decreased 4.3 percentage points to 52.4 percent, and the Employment Index decreased 2.7 percentage points to 48.2 percent, reflecting contraction after one month of growth. The Prices Index increased 7.6 percentage points to 60.3 percent in August, indicating that prices increased significantly in July. According to the NMI, nine non-manufacturing industries reported growth in August. Respondents' comments continue to be mixed about business conditions and the state of the overall economy."

INDUSTRY PERFORMANCE (Based on the NMI)

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

WHAT RESPONDENTS ARE SAYING ...
  • "In general, sales have increased slightly compared to the same period last year. However, [sales] are still significantly less than the same period two years ago." (Public Administration)
  • "Continuing to show signs of positive growth." (Construction)
  • "Business is pretty stagnant; starting to see price erosion in our selling markets." (Agriculture, Forestry, Fishing & Hunting)
  • "Due to general economic conditions, we are finding more aggressive pricing and deals to win business in the competitive marketplace." (Health Care & Social Assistance)
  • "We are anticipating a slowdown in the third and fourth quarter of this year, with no signs of recovery for the next few quarters." (Professional, Scientific & Technical Services)
  • "Purchasing has been cut back to meet expenses. As a result, some segments of company revenue have been negatively impacted." (Retail Trade)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
AUGUST 2010
  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 51.5 54.3 -2.8 Growing Slower 8 56.3 55.5 +0.8
Business Activity/Production 54.4 57.4 -3.0 Growing Slower 9 59.9 57.0 +2.9
New Orders 52.4 56.7 -4.3 Growing Slower 12 53.1 53.5 -0.4
Employment 48.2 50.9 -2.7 Contracting From Growing 1 60.4 58.6 +1.8
Supplier Deliveries 51.0 52.0 -1.0 Slowing Slower 5 56.6 58.3 -1.7
Inventories 53.5 55.5 -2.0 Growing Slower 5 51.4 50.2 +1.2
Prices 60.3 52.7 +7.6 Increasing Faster 13 61.5 57.5 +4.0
Backlog of Orders 50.5 52.0 -1.5 Growing Slower 4 51.5 54.5 -3.0
New Export Orders 46.5 52.0 -5.5 Contracting From Growing 1 55.5 56.5 -1.0
Imports 50.5 48.0 +2.5 Growing From Contracting 1 56.5 52.5 +4.0
Inventory Sentiment 60.0 59.0 +1.0 Too High Faster 159 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 43.5 39.0 +4.5

* 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

Bacon; Beef (5); Butter; Chicken; Coated Groundwood (2); Dairy; Diesel Fuel; #2 Diesel Fuel (2); Freight Charges (2); Fuel (8); Gasoline (2); Linen; Pharmacy Products (2); Pork; and Transportation Costs.

Commodities Down in Price

No commodities are reported down in price.

Commodities in Short Supply

Coated Groundwood (2) is the only commodity reported in short supply.

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



AUGUST 2010 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In August, the NMI registered 51.5 percent, indicating continued growth in the non-manufacturing sector for the eighth 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
Aug 2010 51.5 Feb 2010 53.0
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
Average for 12 months — 52.3
High — 55.4
Low — 48.2
Business Activity

ISM's Non-Manufacturing Business Activity Index in August registered 54.4 percent, a decrease of 3 percentage points when compared to the 57.4 percent registered in July. Seven industries reported increased business activity, and six industries reported decreased activity for the month of August. Five industries reported no change from July. Comments from respondents include: "Spend trending up in services and technology" and "Orders delayed or cancelled; loss of orders due to pricing pressures."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
Aug 2010 27 53 20 54.4
Jul 2010 27 57 16 57.4
Jun 2010 35 56 9 58.1
May 2010 38 53 9 61.1

New Orders

ISM's Non-Manufacturing New Orders Index grew in August for the 12th consecutive month. The index registered 52.4 percent, which is a decrease of 4.3 percentage points from the 56.7 percent reported in July. Comments from respondents include: "More requisitions for goods and services" and "Summer slowdown and sluggish economy."

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


New Orders
%
Higher
%
Same
%
Lower

Index
Aug 2010 22 61 17 52.4
Jul 2010 29 54 17 56.7
Jun 2010 30 56 14 54.4
May 2010 35 52 13 57.1

Employment

Employment activity in the non-manufacturing sector contracted in August after growing in July. July represented the second time in the past four months, and only the second time since December 2007, that the index has expanded. ISM's Non-Manufacturing Employment Index for August registered 48.2 percent. This reflects a decrease of 2.7 percentage points when compared to the 50.9 percent registered in July. Three industries reported increased employment, 10 industries reported decreased employment, and five industries reported unchanged employment compared to July. Comments from respondents include: "Planned downsizing due to changing business model" and "Holding the line on no new hires."

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


Employment
%
Higher
%
Same
%
Lower

Index
Aug 2010 13 69 18 48.2
Jul 2010 17 73 10 50.9
Jun 2010 18 70 12 49.7
May 2010 22 65 13 50.4

Supplier Deliveries

The Supplier Deliveries Index registered 51 percent in August, 1 percentage point lower than the 52 percent registered in July, indicating that supplier deliveries continued to slow in August. A reading above 50 percent indicates slower deliveries.

The seven industries reporting slower deliveries in August — listed in order — are: Real Estate, Rental & Leasing; Educational Services; Construction; Other Services; Information; Transportation & Warehousing; and Finance & Insurance. The three industries reporting faster supplier deliveries in August are: Utilities; Professional, Scientific & Technical Services; and Public Administration.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Aug 2010 11 80 9 51.0
Jul 2010 9 86 5 52.0
Jun 2010 10 86 4 53.0
May 2010 10 86 4 53.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 53.5 percent in August, indicating that inventory levels grew in August for the fifth consecutive month. Of the total respondents in August, 26 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Improved inventory management practices" and "Investing to meet short-term increase."

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


Inventories
%
Higher
%
Same
%
Lower

Index
Aug 2010 19 69 12 53.5
Jul 2010 27 57 16 55.5
Jun 2010 26 65 9 58.5
May 2010 32 61 7 62.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in August at a significantly faster rate than in July. ISM's Non-Manufacturing Prices Index for August registered 60.3 percent, 7.6 percentage points higher than the 52.7 percent reported in July. In August, the percentage of respondents reporting higher prices is 19 percent, the percentage indicating no change in prices paid is 77 percent, and 4 percent of the respondents reported lower prices.

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


Prices
%
Higher
%
Same
%
Lower

Index
Aug 2010 19 77 4 60.3
Jul 2010 21 71 8 52.7
Jun 2010 27 64 9 53.8
May 2010 35 60 5 60.6

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew in August for the fourth consecutive month. The index registered 50.5 percent, 1.5 percentage points lower than the 52 percent reported in July. Of the total respondents in August, 45 percent indicated they do not measure backlog of orders.

The six industries reporting an increase in order backlogs in August — listed in order — are: Construction; Transportation & Warehousing; Health Care & Social Assistance; Accommodation & Food Services; Wholesale Trade; and Public Administration. The seven industries reporting lower backlog of orders in August — listed in order — are: Utilities; Mining; Other Services; Professional, Scientific & Technical Services; Retail Trade; Information; and Finance & Insurance.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Aug 2010 18 65 17 50.5
Jul 2010 13 78 9 52.0
Jun 2010 20 71 9 55.5
May 2010 18 76 6 56.0

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 August after one month of growth. The New Export Orders Index for August registered 46.5 percent, which is 5.5 percentage points lower than the 52 percent registered in July. Of the total respondents in August, 67 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 August are: Construction; Other Services; Finance & Insurance; and Accommodation & Food Services. The four industries reporting a decrease in export orders in August are: Mining; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; and Wholesale Trade.


New Export Orders
%
Higher
%
Same
%
Lower

Index
Aug 2010 10 73 17 46.5
Jul 2010 15 74 11 52.0
Jun 2010 11 74 15 48.0
May 2010 19 69 12 53.5

Imports

The ISM Non-Manufacturing Imports Index grew in August after two consecutive months of contraction. The index registered 50.5 percent, which is 2.5 percentage points higher than the 48 percent reported in July. In August, 60 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The two industries reporting an increase in the use of imports in August are: Information; and Accommodation & Food Services. The two industries reporting a decrease in imports for the month of August are: Agriculture, Forestry, Fishing & Hunting; and Retail Trade. Thirteen industries reported no change for the month of August.


Imports
%
Higher
%
Same
%
Lower

Index
Aug 2010 10 81 9 50.5
Jul 2010 8 80 12 48.0
Jun 2010 7 82 11 48.0
May 2010 15 83 2 56.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in August registered 60 percent, which is 1 percentage point higher than the 59 percent reported in July. This indicates that respondents believe their inventories are too high at this time. In August, 27 percent of respondents said their inventories were too high, 7 percent said their inventories were too low, and 66 percent said their inventories were about right.

The eight industries reporting a feeling that their inventories are too high in August — listed in order — are: Mining; Arts, Entertainment & Recreation; Accommodation & Food Services; Finance & Insurance; Information; Professional, Scientific & Technical Services; Wholesale Trade; and Health Care & Social Assistance. No industries reported that inventories are too low in August.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Aug 2010 27 66 7 60.0
Jul 2010 27 64 9 59.0
Jun 2010 25 68 7 59.0
May 2010 27 67 6 60.5

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 2010 data will be released at 10:00 a.m. (ET) on Tuesday, October 5, 2010.



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