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May 2011 Non-Manufacturing ISM Report On Business®

FOR RELEASE: June 3, 2011


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


NMI at 54.6%

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 2011.

Business Activity Index at 53.6%
New Orders Index at 56.8%
Employment Index at 54%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in May for the 18th 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 54.6 percent in May, 1.8 percentage points higher than the 52.8 percent registered in April, and indicating continued growth at a faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased 0.1 percentage point to 53.6 percent, reflecting growth for the 22nd consecutive month, but at a slightly slower rate than in April. The New Orders Index increased by 4.1 percentage points to 56.8 percent. The Employment Index increased 2.1 percentage points to 54 percent, indicating growth in employment for the ninth consecutive month and at a faster rate. The Prices Index decreased 0.5 percentage point to 69.6 percent, indicating that prices increased at a slightly slower rate in May when compared to April. According to the NMI, 16 non-manufacturing industries reported growth in May. Respondents' comments are mostly positive about overall business conditions. There is a sentiment that there is a degree of stability in the economy; however, a continued concern exists over fuel costs and various volatile commodities."

INDUSTRY PERFORMANCE (Based on the NMI)

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

WHAT RESPONDENTS ARE SAYING ...
  • "Business is O.K. Fuel prices and truck availability are starting to be a negative force on our supply chain." (Agriculture, Forestry, Fishing & Hunting)
  • "Business conditions are stabilized." (Health Care & Social Assistance)
  • "First and second quarters of 2011 have been up 25 percent over 2010; however, we expect a slight slowdown over the summer months." (Professional, Scientific & Technical Services)
  • "Uncertainty within commodity markets, especially fuel- and oil-based products, is putting pressure once again and forcing us to retrench as we look for stability. We expect the remainder of 2011 and at least the first two quarters of 2012 to be tumultuous." (Retail Trade)
  • "Volatile commodity prices adding stress to meat and dairy producers; increasing fuel prices are a problem for many." (Wholesale Trade)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
MAY 2011
  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 54.6 52.8 +1.8 Growing Faster 18 53.5 60.4 -6.9
Business Activity/Production 53.6 53.7 -0.1 Growing Slower 22 54.0 63.8 -9.8
New Orders 56.8 52.7 +4.1 Growing Faster 22 51.0 61.7 -10.7
Employment 54.0 51.9 +2.1 Growing Faster 9 58.2 62.7 -4.5
Supplier Deliveries 54.0 53.0 +1.0 Slowing Faster 14 55.7 60.2 -4.5
Inventories 55.0 55.5 -0.5 Growing Slower 4 48.7 53.6 -4.9
Prices 69.6 70.1 -0.5 Increasing Slower 22 76.5 85.5 -9.0
Backlog of Orders 55.0 55.5 -0.5 Growing Slower 5 50.5 61.0 -10.5
New Export Orders 57.0 53.5 +3.5 Growing Faster 9 55.0 62.0 -7.0
Imports 50.5 57.0 -6.5 Growing Slower 2 54.5 55.5 -1.0
Inventory Sentiment 55.0 57.5 -2.5 Too High Slower 168 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 39.5 40.5 -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

Adhesives; Air Freight (2); Aircraft Parts; Airfares (6); Aluminum; Beef (2); Can Liners (2); Chemicals; Chemical Products; Coffee; Conveyor Products; Copper (4); Copper Products (6); Copper Wire; Cotton Products (9); #1 Diesel Fuel (8); #2 Diesel Fuel (11); Food Products; Fuel (17); Fuel Products; Fuel Surcharges (5); Gasoline (8); HDPE; LDPE; Latex Gloves (5); Ocean Freight; Oil; Oil Products (2); Packaging Materials (3); Paper (7); Paper Products; Petroleum Products (5); Petroleum Resin Products; Plastics (2); Plastic Products (3); Polyethylene Bags (6); Polyethylene Resins; Rubber Based Products; Steel (6); Steel Pipe and Fittings (2); Steel Products (6); Textiles (2); Transportation Costs (2); and Transportation Services.

Commodities Down in Price

No commodities are reported down in price.

Commodities in Short Supply

Heavy Truck Transmissions; and Medications.

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



MAY 2011 NON-MANUFACTURING INDEX SUMMARIES


NMI

In May, the NMI registered 54.6 percent, indicating continued growth in the non-manufacturing sector for the 18th 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 2011 54.6 Nov 2010 56.0
Apr 2011 52.8 Oct 2010 54.6
Mar 2011 57.3 Sep 2010 53.9
Feb 2011 59.7 Aug 2010 52.8
Jan 2011 59.4 Jul 2010 53.7
Dec 2010 57.1 Jun 2010 53.5
Average for 12 months – 55.5
High – 59.7
Low – 52.8

Business Activity

ISM's Non-Manufacturing Business Activity Index in May registered 53.6 percent, a decrease of 0.1 percentage point when compared to the 53.7 percent registered in April. Fourteen industries reported increased business activity, and three industries reported decreased activity for the month of May. Comments from respondents include: "Customer demand for certain products has grown considerably" and "Increased orders due to more confidence in the economy."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
May 2011 29 57 14 53.6
Apr 2011 34 54 12 53.7
Mar 2011 37 52 11 59.7
Feb 2011 37 51 12 66.9

New Orders

ISM's Non-Manufacturing New Orders Index grew in May for the 22nd consecutive month. The index registered 56.8 percent, an increase of 4.1 percentage points from the 52.7 percent reported in April. Comments from respondents include: "Slightly improved business conditions and outlook" and "Increased proposal activity."

The 15 industries reporting growth of new orders in May — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Utilities; Real Estate, Rental & Leasing; Mining; Management of Companies & Support Services; Other Services; Professional, Scientific & Technical Services; Transportation & Warehousing; Construction; Arts, Entertainment & Recreation; Finance & Insurance; Health Care & Social Assistance; Accommodation & Food Services; Public Administration; and Information. The two industries reporting contraction of new orders in May are: Retail Trade and Educational Services.


New Orders
%
Higher
%
Same
%
Lower

Index
May 2011 32 54 14 56.8
Apr 2011 34 52 14 52.7
Mar 2011 36 55 9 64.1
Feb 2011 31 61 8 64.4

Employment

Employment activity in the non-manufacturing sector grew in May, as ISM's Non-Manufacturing Employment Index registered 54 percent. This reflects an increase of 2.1 percentage points when compared to the 51.9 percent registered in April. Thirteen industries reported increased employment, three industries reported decreased employment, and two industries reported unchanged employment compared to April. Comments from respondents include: "Preparing for growth" and "Business conditions indicate positive trends. We have begun converting contractors to permanent positions, as well as increasing permanent head count."

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


Employment
%
Higher
%
Same
%
Lower

Index
May 2011 28 63 9 54.0
Apr 2011 26 63 11 51.9
Mar 2011 22 65 13 53.7
Feb 2011 20 68 12 55.6

Supplier Deliveries

The Supplier Deliveries Index registered 54 percent in May, 1 percentage point higher than the 53 percent registered in April, indicating that supplier deliveries continued to slow in May. A reading above 50 percent indicates slower deliveries.

The nine industries reporting slower deliveries in May — listed in order — are: Mining; Other Services; Utilities; Construction; Accommodation & Food Services; Wholesale Trade; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Transportation & Warehousing. The four industries reporting faster supplier deliveries in May are: Agriculture, Forestry, Fishing & Hunting; Retail Trade; Information; and Finance & Insurance. Five industries reported no change in supplier deliveries for the month of May compared to April.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
May 2011 14 80 6 54.0
Apr 2011 10 86 4 53.0
Mar 2011 6 91 3 51.5
Feb 2011 9 86 5 52.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 55 percent in May, 0.5 percentage point lower than the 55.5 percent reading that was reported in April, March and February. Of the total respondents in May, 26 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Improvement in inventory management practices" and "Working down inventory level."

The eight industries reporting an increase in inventories in May — listed in order — are: Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Utilities; Wholesale Trade; Arts, Entertainment & Recreation; Transportation & Warehousing; Public Administration; and Construction. The four industries reporting decreases in inventories in May are: Accommodation & Food Services; Professional, Scientific & Technical Services; Finance & Insurance; and Information. Five industries reported no change in inventories for the month of May compared to April.


Inventories
%
Higher
%
Same
%
Lower

Index
May 2011 26 58 16 55.0
Apr 2011 20 71 9 55.5
Mar 2011 20 71 9 55.5
Feb 2011 22 67 11 55.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in May. ISM's Non-Manufacturing Prices Index for May registered 69.6 percent, 0.5 percentage point lower than the 70.1 percent reported in April. In May, the percentage of respondents reporting higher prices is 53 percent, the percentage indicating no change in prices paid is 42 percent, and 5 percent of the respondents reported lower prices.

Seventeen non-manufacturing industries reported an increase in prices paid, in the following order: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Mining; Utilities; Accommodation & Food Services; Finance & Insurance; Wholesale Trade; Transportation & Warehousing; Public Administration; Information; Professional, Scientific & Technical Services; Retail Trade; Health Care & Social Assistance; Educational Services; Construction; and Management of Companies & Support Services. The only industry reporting no change in prices paid is Other Services.


Prices
%
Higher
%
Same
%
Lower

Index
May 2011 53 42 5 69.6
Apr 2011 57 41 2 70.1
Mar 2011 51 47 2 72.1
Feb 2011 46 50 4 73.3

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew in May for the fifth consecutive month, but at a slightly slower rate. The index registered 55 percent, 0.5 percentage point lower than the 55.5 percent reported in April. Of the total respondents in May, 38 percent indicated they do not measure backlog of orders.

The eight industries reporting an increase in order backlogs in May — listed in order — are: Utilities; Real Estate, Rental & Leasing; Management of Companies & Support Services; Professional, Scientific & Technical Services; Wholesale Trade; Transportation & Warehousing; Construction; and Finance & Insurance. The two industries reporting lower backlog of orders in May are: Retail Trade and Information. Eight industries reported no change in order backlogs for the month of May compared to April.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
May 2011 18 74 8 55.0
Apr 2011 20 71 9 55.5
Mar 2011 20 72 8 56.0
Feb 2011 15 74 11 52.0

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 faster rate in May. The New Export Orders Index for May registered 57 percent, which is 3.5 percentage points higher than the 53.5 percent registered in April and is the ninth consecutive month of growth in the index. Of the total respondents in May, 67 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 May — listed in order — are: Arts, Entertainment & Recreation; Construction; Mining; Accommodation & Food Services; Public Administration; and Professional, Scientific & Technical Services. The three industries reporting a decrease in export orders in May are: Agriculture, Forestry, Fishing & Hunting; Retail Trade; and Wholesale Trade. Six industries reported no change in new export orders for the month of May compared to April.


New Export Orders
%
Higher
%
Same
%
Lower

Index
May 2011 20 74 6 57.0
Apr 2011 20 67 13 53.5
Mar 2011 26 66 8 59.0
Feb 2011 20 73 7 56.5

Imports

The ISM Non-Manufacturing Imports Index registered 50.5 percent in May, which is 6.5 percentage points lower than the 57 percent reported in April. Sixty 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 May are: Arts, Entertainment & Recreation; Other Services; Mining; and Accommodation & Food Services. The three industries reporting a decrease in imports for the month of May are: Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; and Retail Trade. Nine industries reported no change in imports for the month of May compared to April.


Imports
%
Higher
%
Same
%
Lower

Index
May 2011 11 79 10 50.5
Apr 2011 19 76 5 57.0
Mar 2011 11 78 11 50.0
Feb 2011 19 69 12 53.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in May registered 55 percent, which is 2.5 percentage points lower than the 57.5 percent reported in April. This indicates that respondents believe their inventories are still too high at this time. In May, 23 percent of respondents said their inventories were too high, 13 percent said their inventories were too low, and 64 percent said their inventories were about right.

The five industries reporting a feeling that their inventories are too high in May are: Other Services; Information; Finance & Insurance; Retail Trade; and Wholesale Trade. The three industries reporting that inventories are too low in May are: Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; and Construction.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
May 2011 23 64 13 55.0
Apr 2011 21 73 6 57.5
Mar 2011 37 60 3 67.0
Feb 2011 23 69 8 57.5

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 (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 June 2011 data will be released at 10:00 a.m. (ET) on Wednesday, July 6, 2011.



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