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February 2011 Non-Manufacturing ISM Report On Business®

FOR RELEASE: March 3, 2011


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


NMI at 59.7%

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 February 2011.


Business Activity Index at 66.9%
New Orders Index at 64.4%
Employment Index at 55.6%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in February for the 15th 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 registered 59.7 percent in February, 0.3 percentage point higher than the 59.4 percent registered in January, and indicating continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 2.3 percentage points to 66.9 percent, reflecting growth for the 19th consecutive month and at a faster rate than in January. The New Orders Index decreased 0.5 percentage point to 64.4 percent, and the Employment Index increased 1.1 percentage points to 55.6 percent, indicating growth in employment for the sixth consecutive month and at a faster rate. The Prices Index increased 1.2 percentage points to 73.3 percent, indicating that prices increased at a faster rate in February. According to the NMI, 13 non-manufacturing industries reported growth in February. Respondents' comments overall are mostly positive about business conditions and the direction of the economy."

INDUSTRY PERFORMANCE (Based on the NMI)
The 13 industries reporting growth in February based on the NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Accommodation & Food Services; Mining; Utilities; Professional, Scientific & Technical Services; Educational Services; Transportation & Warehousing; Finance & Insurance; Other Services; Public Administration; Wholesale Trade; Management of Companies & Support Services; and Retail Trade. The five industries reporting contraction in February are: Agriculture, Forestry, Fishing & Hunting; Construction; Health Care & Social Assistance; Arts, Entertainment & Recreation; and Information.
WHAT RESPONDENTS ARE SAYING ...
  • "Business started picking up late last year and appears to be sustaining that level through the beginning of 2011." (Professional, Scientific & Technical Services)
  • "Business environment is generally improving." (Management of Companies & Support Services)
  • "We are seeing strength in our business both from the perspective of new business and expansion with our existing customers." (Finance & Insurance)
  • "Strong demand; capacity crunch all around." (Transportation & Warehousing)
  • "Major uptick in business activities." (Accommodation & Food Services)
  • "Commodities are once again putting significant pressure on prices and capacity." (Retail Trade)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
FEBRUARY 2011
  Non-Manufacturing Manufacturing
Index Series
Index
Feb.
Series
Index
Jan.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Feb.
Series
Index
Jan.
Percent
Point
Change
NMI/PMI 59.7 59.4 +0.3 Growing Faster 15 61.4 60.8 +0.6
Business Activity/Production 66.9 64.6 +2.3 Growing Faster 19 66.3 63.5 +2.8
New Orders 64.4 64.9 -0.5 Growing Slower 19 68.0 67.8 +0.2
Employment 55.6 54.5 +1.1 Growing Faster 6 64.5 61.7 +2.8
Supplier Deliveries 52.0 53.5 -1.5 Slowing Slower 11 59.4 58.6 +0.8
Inventories 55.5 49.0 +6.5 Growing From Contracting 1 48.8 52.4 -3.6
Prices 73.3 72.1 +1.2 Increasing Faster 19 82.0 81.5 +0.5
Backlog of Orders 52.0 50.5 +1.5 Growing Faster 2 59.0 58.0 +1.0
New Export Orders 56.5 53.5 +3.0 Growing Faster 6 62.5 62.0 +0.5
Imports 53.5 53.5 0.0 Growing Unchanged 7 55.0 55.0 0.0
Inventory Sentiment 57.5 60.0 -2.5 Too High Slower 165 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 (3); Beef; Cable Products; Capital Equipment; Carbon Pipe (2); Coffee; Consulting Services; Contract Labor; Copper; Copper Products (3); Cotton (4); Cotton Products (6); Dairy; #1 Diesel Fuel (5); #2 Diesel Fuel (8); Electrical Supplies; Energy; Fiber Optic Cables; Flour; Food and Beverage (2); Fuel (14); Fuel Surcharges (2); Gasoline (5); Janitorial Supplies (2); Large Bore Bearings; Latex Gloves (2); Lettuce; Paper (4); Paper Bags; Petroleum Products (2); Plastic Film (2); Plywood; Polyester; Polyethylene Bags (3); Polyethylene; Polypropylene; Professional Services; Services Labor; Steel (3); Steel Products (3); and Trucks.

Commodities Down in Price

Computer Supplies; and Janitorial Services.

Commodities in Short Supply

Cotton (2); Cotton Products (2); and Electrical Components.

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



FEBRUARY 2011 NON-MANUFACTURING INDEX SUMMARIES


NMI

In February, the NMI registered 59.7 percent, indicating continued growth in the non-manufacturing sector for the 15th 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
Feb 2011 59.7 Aug 2010 52.8
Jan 2011 59.4 Jul 2010 53.7
Dec 2010 57.1 Jun 2010 53.5
Nov 2010 56.0 May 2010 54.8
Oct 2010 54.6 Apr 2010 54.6
Sep 2010 53.9 Mar 2010 54.1
Average for 12 months – 55.4
High – 59.7
Low – 52.8

Business Activity

ISM's Non-Manufacturing Business Activity Index in February registered 66.9 percent, an increase of 2.3 percentage points when compared to the 64.6 percent registered in January. Thirteen industries reported increased business activity, and four industries reported decreased activity for the month of February. One industry reported no change from January. Comments from respondents include: "Capital projects moved from inactive to active" and "Award of long-awaited contracts."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
Feb 2011 37 51 12 66.9
Jan 2011 34 47 19 64.6
Dec 2010 36 50 14 62.9
Nov 2010 28 56 16 59.4

New Orders

ISM's Non-Manufacturing New Orders Index grew in February for the 19th consecutive month. The index registered 64.4 percent, which is a decrease of 0.5 percentage point from the 64.9 percent reported in January. Comments from respondents include: "Market share gains and economy" and "Business is growing."

The 11 industries reporting growth of new orders in February — listed in order — are: Real Estate, Rental & Leasing; Accommodation & Food Services; Utilities; Educational Services; Mining; Professional, Scientific & Technical Services; Other Services; Transportation & Warehousing; Public Administration; Finance & Insurance; and Wholesale Trade. The three industries reporting contraction of new orders in February are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; and Retail Trade.


New Orders
%
Higher
%
Same
%
Lower

Index
Feb 2011 31 61 8 64.4
Jan 2011 36 48 16 64.9
Dec 2010 34 52 14 61.4
Nov 2010 32 52 16 58.5

Employment

Employment activity in the non-manufacturing sector grew in February, as ISM's Non-Manufacturing Employment Index registered 55.6 percent. This reflects an increase of 1.1 percentage points when compared to the 54.5 percent registered in January. Nine industries reported increased employment, five industries reported decreased employment, and four industries reported unchanged employment compared to January. Comments from respondents include: "Starting to fill positions reduced from 2009/2010 season" and "To handle the new influx of sales and sales activity."

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


Employment
%
Higher
%
Same
%
Lower

Index
Feb 2011 20 68 12 55.6
Jan 2011 16 64 20 54.5
Dec 2010 18 66 16 52.6
Nov 2010 16 73 11 53.6

Supplier Deliveries

The Supplier Deliveries Index registered 52 percent in February, 1.5 percentage points lower than the 53.5 percent registered in January, indicating that supplier deliveries continued to slow in February, but at a slower rate. A reading above 50 percent indicates slower deliveries.

The eight industries reporting slower deliveries in February — listed in order — are: Real Estate, Rental & Leasing; Mining; Arts, Entertainment & Recreation; Retail Trade; Wholesale Trade; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Finance & Insurance. The only industry reporting faster supplier deliveries in February is Agriculture, Forestry, Fishing & Hunting. Nine industries reported no change in supplier deliveries for the month of February.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Feb 2011 9 86 5 52.0
Jan 2011 11 85 4 53.5
Dec 2010 8 87 5 51.5
Nov 2010 7 91 2 52.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 55.5 percent in February, indicating that inventory levels grew in February after one month of contraction. Of the total respondents in February, 27 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Inventory levels are now where they should be" and "Buying ahead of price increases."

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


Inventories
%
Higher
%
Same
%
Lower

Index
Feb 2011 22 67 11 55.5
Jan 2011 19 60 21 49.0
Dec 2010 17 71 12 52.5
Nov 2010 19 65 16 51.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in February. ISM's Non-Manufacturing Prices Index for February registered 73.3 percent, 1.2 percentage points higher than the 72.1 percent reported in January. In February, the percentage of respondents reporting higher prices is 46 percent, the percentage indicating no change in prices paid is 50 percent, and 4 percent of the respondents reported lower prices.

In February, 17 industries reported an increase in prices paid, in the following order: Construction; Real Estate, Rental & Leasing; Management of Companies & Support Services; Accommodation & Food Services; Arts, Entertainment & Recreation; Educational Services; Retail Trade; Wholesale Trade; Information; Mining; Other Services; Transportation & Warehousing; Professional, Scientific & Technical Services; Utilities; Health Care & Social Assistance; Finance & Insurance; and Public Administration. The only industry reporting prices as decreasing for the month of February is Agriculture, Forestry, Fishing & Hunting.


Prices
%
Higher
%
Same
%
Lower

Index
Feb 2011 46 50 4 73.3
Jan 2011 46 50 4 72.1
Dec 2010 35 60 5 69.5
Nov 2010 28 67 5 64.7

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew in February for the second consecutive month. The index registered 52 percent, 1.5 percentage points higher than the 50.5 percent reported in January. Of the total respondents in February, 42 percent indicated they do not measure backlog of orders.

The seven industries reporting an increase in order backlogs in February — listed in order — are: Educational Services; Management of Companies & Support Services; Information; Construction; Finance & Insurance; Professional, Scientific & Technical Services; and Transportation & Warehousing. The two industries reporting lower backlog of orders in February are: Utilities and Public Administration.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Feb 2011 15 74 11 52.0
Jan 2011 17 67 16 50.5
Dec 2010 15 67 18 48.5
Nov 2010 17 69 14 51.5

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 at a faster rate in February. The New Export Orders Index for February registered 56.5 percent, which is 3 percentage points higher than the 53.5 percent registered in January. Of the total respondents in February, 63 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The six industries reporting an increase in new export orders in February — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Information; Accommodation & Food Services; Retail Trade; Transportation & Warehousing; and Professional, Scientific & Technical Services. The two industries reporting a decrease in export orders in February are: Arts, Entertainment & Recreation; and Wholesale Trade. Four industries reported no change in new export orders for the month of February.


New Export Orders
%
Higher
%
Same
%
Lower

Index
Feb 2011 20 73 7 56.5
Jan 2011 23 61 16 53.5
Dec 2010 24 64 12 56.0
Nov 2010 24 71 5 59.5

Imports

The ISM Non-Manufacturing Imports Index grew in February for the seventh consecutive month. The index registered 53.5 percent, which is the same as reported in January. In February, 58 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The five industries reporting an increase in the use of imports in February are: Educational Services; Information; Accommodation & Food Services; Professional, Scientific & Technical Services; and Retail Trade. The four industries reporting a decrease in imports for the month of February are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Other Services; and Wholesale Trade. Seven industries reported no change in imports for the month of February.


Imports
%
Higher
%
Same
%
Lower

Index
Feb 2011 19 69 12 53.5
Jan 2011 17 73 10 53.5
Dec 2010 15 72 13 51.0
Nov 2010 16 77 7 54.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in February registered 57.5 percent, which is 2.5 percentage points lower than the 60 percent reported in January. This indicates that respondents believe their inventories are too high at this time. In February, 23 percent of respondents said their inventories were too high, 8 percent said their inventories were too low, and 69 percent said their inventories were about right.

The five industries reporting a feeling that their inventories are too high in February are: Management of Companies & Support Services; Wholesale Trade; Other Services; Finance & Insurance; and Health Care & Social Assistance. The three industries reporting that inventories are too low in February are: Public Administration; Professional, Scientific & Technical Services; and Construction.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Feb 2011 23 69 8 57.5
Jan 2011 26 68 6 60.0
Dec 2010 25 73 2 61.5
Nov 2010 27 66 7 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 (Non-Manufacturing Index) 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 March 2011 data will be released at 10:00 a.m. (ET) on Tuesday, April 5, 2011.



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