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December 2010 Non-Manufacturing ISM Report On Business®

FOR RELEASE: January 5, 2011


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


NMI at 57.1%

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 December 2010.


Business Activity Index at 63.5%
New Orders Index at 63%
Employment Index at 50.5%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in December for the 12th 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. "The NMI (Non-Manufacturing Index) registered 57.1 percent in December, 2.1 percentage points higher than the 55 percent registered in November, and indicating continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 6.5 percentage points to 63.5 percent, reflecting growth for the 13th consecutive month at a faster rate than in November. The New Orders Index increased 5.3 percentage points to 63 percent, and the Employment Index decreased 2.2 percentage points to 50.5 percent, indicating growth in employment for the fourth consecutive month, but at a slower rate. The Prices Index increased 6.8 percentage points to 70 percent, indicating that prices increased significantly in December. According to the NMI, 14 non-manufacturing industries reported growth in December. Respondents' comments vary by company and industry, but overall are mostly positive about business conditions."

INDUSTRY PERFORMANCE (Based on the NMI)

The 14 industries reporting growth in December based on the NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Retail Trade; Information; Mining; Transportation & Warehousing; Professional, Scientific & Technical Services; Utilities; Finance & Insurance; Management of Companies & Support Services; Wholesale Trade; Arts, Entertainment & Recreation; Health Care & Social Assistance; Accommodation & Food Services; and Construction. The three industries reporting contraction in December are: Agriculture, Forestry, Fishing & Hunting; Educational Services; and Public Administration.

WHAT RESPONDENTS ARE SAYING ...
  • "Overall business climate remains reasonably positive." (Management of Companies & Support Services)
  • "Pricing pressures are starting to heat up." (Construction)
  • "Outlook for 2011 is positive with an increase in spending." (Finance & Insurance)
  • "Looks like more budget reductions are coming in the next year." (Educational Services)
  • "Cotton prices are moving upward, but prices are being kept in line as the overall Asian market cools somewhat."(Retail Trade)
  • "Business picking up for holiday — above expectations." (Transportation & Warehousing)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
DECEMBER 2010
  Non-Manufacturing Manufacturing
Index Series
Index
Dec.
Series
Index
Nov.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Dec.
Series
Index
Nov.
Percent
Point
Change
NMI/PMI 57.1 55.0 +2.1 Growing Faster 12 57.0 56.6 +0.4
Business Activity/Production 63.5 57.0 +6.5 Growing Faster 13 60.7 55.0 +5.7
New Orders 63.0 57.7 +5.3 Growing Faster 16 60.9 56.6 +4.3
Employment 50.5 52.7 -2.2 Growing Slower 4 55.7 57.5 -1.8
Supplier Deliveries 51.5 52.5 -1.0 Slowing Slower 9 55.9 57.2 -1.3
Inventories 52.5 51.5 +1.0 Growing Faster 2 51.8 56.7 -4.9
Prices 70.0 63.2 +6.8 Increasing Faster 17 72.5 69.5 +3.0
Backlog of Orders 48.5 51.5 -3.0 Contracting From Growing 1 47.0 46.0 +1.0
New Export Orders 56.0 59.5 -3.5 Growing Slower 4 54.5 57.0 -2.5
Imports 51.0 54.5 -3.5 Growing Slower 5 50.5 53.0 -2.5
Inventory Sentiment 61.5 60.0 +1.5 Too High Faster 163 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 40.0 45.5 -5.5

* 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

Airfares; Batteries; Beef; Copper Products; Cotton (2); Cotton Products (4); #1 Diesel Fuel (3); #2 Diesel Fuel (6); Fuel (12); Gasoline (3); Heating Fuel; Liner Bags; Paper (2); Polyester and Polyester Products; Polyethylene Bags; Service Labor; Soy Oil; Steel; Steel Products; Sugar; Transportation Costs; and Waste Management Services.

Commodities Down in Price

Computer and Peripherals; and Pork Products.

Commodities in Short Supply

Coated Groundwood (6); and Electronic Parts.

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



DECEMBER 2010 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In December, the NMI registered 57.1 percent, indicating continued growth in the non-manufacturing sector for the 12th 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
Dec 2010 57.1 Jun 2010 53.8
Nov 2010 55.0 May 2010 55.4
Oct 2010 54.3 Apr 2010 55.4
Sep 2010 53.2 Mar 2010 55.4
Aug 2010 51.5 Feb 2010 53.0
Jul 2010 54.3 Jan 2010 50.5
Average for 12 months – 54.1
High – 57.1
Low – 50.5

Business Activity

ISM's Non-Manufacturing Business Activity Index in December registered 63.5 percent, an increase of 6.5 percentage points when compared to the 57 percent registered in November. Fourteen industries reported increased business activity, and two industries reported decreased activity for the month of December. Two industries reported no change from November. Comments from respondents include: "Consumer optimism increasing" and "More end-of-year budget releases."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
Dec 2010 36 50 14 63.5
Nov 2010 28 56 16 57.0
Oct 2010 30 57 13 58.4
Sep 2010 25 56 19 52.8

New Orders

ISM's Non-Manufacturing New Orders Index grew in December for the 16th consecutive month. The index registered 63 percent, which is an increase of 5.3 percentage points from the 57.7 percent reported in November. Comments from respondents include: "Increased demand for new products recently launched" and "Increase in business from existing clients and increased marketing efforts."

The 14 industries reporting growth of new orders in December — listed in order — are: Real Estate, Rental & Leasing; Mining; Retail Trade; Information; Arts, Entertainment & Recreation; Construction; Transportation & Warehousing; Professional, Scientific & Technical Services; Finance & Insurance; Management of Companies & Support Services; Health Care & Social Assistance; Utilities; Accommodation & Food Services; and Wholesale Trade. The two industries reporting contraction of new orders in December are: Public Administration and Educational Services.


New Orders
%
Higher
%
Same
%
Lower

Index
Dec 2010 34 52 14 63.0
Nov 2010 32 52 16 57.7
Oct 2010 25 63 12 56.7
Sep 2010 23 62 15 54.9

Employment

Employment activity in the non-manufacturing sector grew in December, as ISM's Non-Manufacturing Employment Index registered 50.5 percent. This reflects a decrease of 2.2 percentage points when compared to the 52.7 percent registered in November. Nine industries reported increased employment, seven industries reported decreased employment, and two industries reported unchanged employment compared to November. Comments from respondents include: "We had a small reduction in force to reduce operating costs" and "We've added approximately 3 percent to our workforce for sessional [legislative] (part-time) season."

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


Employment
%
Higher
%
Same
%
Lower

Index
Dec 2010 18 66 16 50.5
Nov 2010 16 73 11 52.7
Oct 2010 13 69 18 50.9
Sep 2010 15 68 17 50.2

Supplier Deliveries

The Supplier Deliveries Index registered 51.5 percent in December, 1 percentage point lower than the 52.5 percent registered in November, indicating that supplier deliveries continued to slow in December. A reading above 50 percent indicates slower deliveries.

The three industries reporting slower deliveries in December are: Wholesale Trade; Retail Trade; and Public Administration. The four industries reporting faster supplier deliveries in December are: Other Services; Educational Services; Finance & Insurance; and Professional, Scientific & Technical Services. Eleven industries reported no change in supplier deliveries for the month of December.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Dec 2010 8 87 5 51.5
Nov 2010 7 91 2 52.5
Oct 2010 8 86 6 51.0
Sep 2010 13 84 3 55.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 52.5 percent in December, indicating that inventory levels grew in December for the second consecutive month. Of the total respondents in December, 30 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Continuing to manage inventories closer to just in time" and "Buying ahead because of pending price increases."

The six industries reporting an increase in inventories in December — listed in order — are: Real Estate, Rental & Leasing; Retail Trade; Utilities; Transportation & Warehousing; Professional, Scientific & Technical Services; and Wholesale Trade. The six industries reporting decreases in inventories in December — listed in order — are: Management of Companies & Support Services; Information; Accommodation & Food Services; Finance & Insurance; Public Administration; and Arts, Entertainment & Recreation.


Inventories
%
Higher
%
Same
%
Lower

Index
Dec 2010 17 71 12 52.5
Nov 2010 19 65 16 51.5
Oct 2010 16 63 21 47.5
Sep 2010 14 66 20 47.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased substantially in December. ISM's Non-Manufacturing Prices Index for December registered 70 percent, 6.8 percentage points higher than the 63.2 percent reported in November. In December, 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 December, 15 industries reported an increase in prices paid, in the following order: Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Educational Services; Accommodation & Food Services; Other Services; Utilities; Mining; Public Administration; Finance & Insurance; Management of Companies & Support Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; Construction; Information; and Retail Trade. The only industry reporting prices as decreasing for the month of December is Arts, Entertainment & Recreation. Two industries reported no change in prices for the month of December.


Prices
%
Higher
%
Same
%
Lower

Index
Dec 2010 35 60 5 70.0
Nov 2010 28 67 5 63.2
Oct 2010 32 65 3 68.3
Sep 2010 22 70 8 60.1

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in December after two consecutive months of growth. The index registered 48.5 percent, 3 percentage points lower than the 51.5 percent reported in November. Of the total respondents in December, 43 percent indicated they do not measure backlog of orders.

The five industries reporting an increase in order backlogs in December are: Mining; Utilities; Construction; Retail Trade; and Health Care & Social Assistance. The five industries reporting lower backlog of orders in December are: Finance & Insurance; Wholesale Trade; Public Administration; Transportation & Warehousing; and Other Services.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Dec 2010 15 67 18 48.5
Nov 2010 17 69 14 51.5
Oct 2010 16 72 12 52.0
Sep 2010 15 66 19 48.0

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 at a slower rate in December. The New Export Orders Index for December registered 56 percent, which is 3.5 percentage points lower than the 59.5 percent registered in November. Of the total respondents in December, 67 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The eight industries reporting an increase in new export orders in December — listed in order — are: Construction; Information; Mining; Accommodation & Food Services; Other Services; Retail Trade; Transportation & Warehousing; and Wholesale Trade. The three industries reporting a decrease in export orders in December are: Agriculture, Forestry, Fishing & Hunting; Public Administration; and Professional, Scientific & Technical Services. Three industries reported no change in new export orders for the month of December.


New Export Orders
%
Higher
%
Same
%
Lower

Index
Dec 2010 24 64 12 56.0
Nov 2010 24 71 5 59.5
Oct 2010 25 61 14 55.5
Sep 2010 23 70 7 58.0

Imports

The ISM Non-Manufacturing Imports Index grew in December for the fifth consecutive month, but at a slower rate. The index registered 51 percent, which is 3.5 percentage points lower than the 54.5 percent reported in November. In December, 61 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 December are: Information; Retail Trade; Agriculture, Forestry, Fishing & Hunting; and Management of Companies & Support Services. The five industries reporting a decrease in imports for the month of December are: Educational Services; Public Administration; Finance & Insurance; Wholesale Trade; and Accommodation & Food Services. Nine industries reported no change in imports for the month of December.


Imports
%
Higher
%
Same
%
Lower

Index
Dec 2010 15 72 13 51.0
Nov 2010 16 77 7 54.5
Oct 2010 15 78 7 54.0
Sep 2010 14 78 8 53.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in December registered 61.5 percent, which is 1.5 percentage points higher than the 60 percent reported in November. This indicates that respondents believe their inventories are too high at this time. In December, 25 percent of respondents said their inventories were too high, 2 percent said their inventories were too low, and 73 percent said their inventories were about right.

The seven industries reporting a feeling that their inventories are too high in December — listed in order — are: Other Services; Wholesale Trade; Health Care & Social Assistance; Utilities; Finance & Insurance; Professional, Scientific & Technical Services; and Accommodation & Food Services. The only industry reporting that inventories are too low in December is Retail Trade.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Dec 2010 25 73 2 61.5
Nov 2010 27 66 7 60.0
Oct 2010 28 67 5 61.5
Sep 2010 27 65 8 59.5

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 January 2011 data will be released at 10:00 a.m. (ET) on Thursday, February 3, 2011.



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