FOR RELEASE: August 4, 2004
|ISM, Media Relations|
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DO NOT CONFUSE THIS NATIONAL NON-MANUFACTURING REPORT with the various regional purchasing and supply reports released across the country or the Manufacturing ISM Report On Business®. The national non-manufacturing report's information reflects the entire United States, while the regional reports cover only their local vicinity. 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 2004.
(Tempe, Arizona) — Business activity in the non-manufacturing sector increased in July 2004, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.
The report was issued today by Ralph G. Kauffman, Ph.D., C.P.M., chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee and coordinator of the purchasing and supply management program, University of Houston-Downtown. "Non-manufacturing Business Activity increased for the 16th consecutive month in July," Kauffman said. He added, "Also in July, New Orders, Order Backlogs, Imports, Prices, Exports and Inventories increased, while Employment was unchanged."
Purchasing and supply executives report that business activity continued to increase in July in the non-manufacturing sector, and the rate of increase was faster than in June. The Business Activity Index for July is 64.8 percent, up 4.9 percentage points from June's 59.9 percent. July's index indicates continued growth across most non-manufacturing industries. In July, 12 industry groups reported growth, one indicated contraction, and four reported business unchanged from June. Increased business activity in July was reported by 38 percent of members, compared to 39 percent in June. Reduced activity was reported by 10 percent of members, compared to 11 percent in June. In July, the remaining 52 percent of members indicated no change in business activity, compared to 50 percent that reported no change in June.
The Backlog of Orders Index decreased by 0.5 percentage point to 55 percent, indicating growth in order backlogs for the 15th consecutive month but at a slightly slower rate of increase than in June. The July New Orders Index increased from 62.4 percent in June to 66.4 percent in July. This indicates a faster rate of increase of new orders in July compared to June. Members reported that the prices they pay increased in July for the 28th consecutive month, with a somewhat slower rate of increase than in June. July's Prices Index is 73.1 percent, a decline of 1.5 percentage points from the 74.6 percent reported in June. This month, 45 percent of all respondents and all 17 non-manufacturing industries reported paying higher prices compared to June. Many of members' comments concerning business in July indicate continued positive business conditions but with continued concern about inflationary pressures. Specific comments include: "Up market products and programs continue to perform well"; "Cautious optimism on future business climate tempered by potential increased inflation and interest rates"; "Higher fuel prices are causing price increases in many other supplies and services"; "General activity is on the rise. We are seeing slowdowns in delivery caused by the increase in activity and reduced inventories"; and "Economy is doing well! Purchases for 1Q05 increasing."
In addition, Inventories increased for the fifth consecutive month. With regard to Inventory Sentiment for July, members reported a higher level of concern than in June that inventories are too high. New Export Orders increased for the 12th consecutive month and Imports increased for the 15th consecutive month. Employment remained unchanged from June at 50 percent. Supplier Deliveries indicated slower performance for the 35th consecutive month.
Significant reports of commodities in short supply or up or down in price in July indicate that cement/concrete; copier paper; electronic parts/products; laboratory materials and supplies; paper; steel; and steel products are in short supply. Price increases are reported for alcohol; aluminum; beef (some reports of price decreases); building materials; chicken; computers and accessories; copier paper; copper; corrugated; dairy products (some reports of price decreases); #2 diesel fuel; energy; fasteners; fine papers; food; fuel (some reports of price decreases); fuel surcharges; furniture; gasoline (some reports of price decreases); #2 heating oil; lumber; medical supplies; natural gas; paper; paper commodities; paper products; petroleum-based products; plastic; plastic products; polyethylene items (large variety); printed materials; roof shingles; roofing materials; stainless steel products; steel; steel products (large variety); switches and switchgear; transportation; and unleaded gasoline (some reports of price decreases). Price decreases are reported for beef (some reports of price increases); butter/butterfat items; cheese; computer systems and peripherals; dairy products (some reports of price increases); fuels (some reports of price increases) gasoline (some reports of price increases); PVC material, fittings, pipe; and unleaded gasoline (some reports of price increases).
Rate of Change
|Business Activity / Production||64.8||59.9||+4.9||Increasing faster||66.1||63.2||+2.9|
|New Orders||66.4||62.4||+4.0||Increasing faster||64.7||60.0||+4.7|
|Employment||50.0||57.4||-7.4||Unchanged from increasing||57.3||59.7||-2.4|
|Supplier Deliveries||58.0||57.5||+0.5||Slowing faster||64.2||68.1||-3.9|
|Backlog of Orders||55.0||55.5||-0.5||Increasing slower||58.0||58.5||-0.5|
|New Export Orders||55.5||59.5||-4.0||Increasing slower||56.2||56.7||-0.5|
|Inventory Sentiment||64.0||60.5||+3.5||Greater feeling of "too high"||N/A||N/A||N/A|
* 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 except for Backlog of Orders, Prices, and Customers' Inventories.
ISM's Non-Manufacturing Business Activity Index in July rose to 64.8 percent from June's 59.9 percent, indicating a faster rate of growth of activity in July. With the exception of March 2003, growth in business activity has been reported by ISM members every month beginning with February 2002. This month, 12 sectors reported increased business activity, one reported decreased activity, and four reported unchanged activity compared to June.
The industries reporting the highest rates of growth of business activity in July are: Transportation; Communication; Wholesale Trade; Utilities; and Business Services. The only industry reporting contraction of business activity in July is Entertainment.
|% Higher||% Same||% Lower||Index|
ISM's Non-Manufacturing New Orders Index increased to 66.4 percent in July from 62.4 percent in June. This indicates continued expansion of new orders at a faster rate of growth than in June. Comments from members include: "New activity is coming from the private sector. It appears that companies are beginning to hire for project work"; "Growth — additional offices"; "Activity levels are at year's best"; and "Meeting increased demand."
Industries reporting the highest rates of growth of new orders in July are: Transportation; Communication; Wholesale Trade; Business Services; and Health Services. No industry reported contraction of new orders in July.
|New Orders||% Higher||% Same||% Lower||Index|
After nine consecutive months of expansion, respondents said employment activity in the non-manufacturing sector was unchanged in July compared to June. ISM's Non-Manufacturing Employment Index for July is 50 percent, a drop of 7.4 percentage points from June's record value of 57.4. Nine industries reported increased employment, six reported decreases, and two indicated employment was unchanged from June. Comments from respondents include: "Continued right-sizing"; "Consolidation"; "Brought on part-time labor to meet project requirements"; "Temporary hold on filling open positions"; and "Added staffing at new stores."
The industries reporting the highest rates of growth in employment in July are: Construction; Legal Services; Transportation; Wholesale Trade; Utilities; and Other Services*. The industries reporting the highest rates of reduction in employment in July are: Agriculture; Finance & Banking; Entertainment; Communication; and Insurance.
|Employment||% Higher||% Same||% Lower||Index|
The delivery performance of suppliers to non-manufacturing organizations was slower for the 35th consecutive month in July. The index registered 58 percent, 0.5 percentage point higher than in June. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in July include: "Leadtimes for some raw materials have increased"; "Office furniture has increased the leadtime from four to six weeks"; "Trucks are hard to find"; and "Slower railroad transit times."
The industries reporting the highest rates of slowing in supplier deliveries in July are: Entertainment; Wholesale Trade; Communication; Mining; and Business Services. The only industry reporting faster supplier deliveries in July is Transportation.
|% Slower||% Same||% Faster||Index|
ISM's Non-Manufacturing Inventories Index registered 54 percent in July, 3.5 percentage points lower than the 57.5 percent reported in June. July's index indicates the fifth monthly increase in material inventories maintained by non-manufacturing organizations. Of the total respondents in July, 30 percent indicate they do not have inventories or do not measure them. Comments from members include: "Using up inventory"; "Seasonal build-up"; "Compensating for lack of trucks in the market"; and "Added inventory stock to support new stores."
The industries reporting the highest rate of inventory increases in July are: Agriculture; Legal Services; Wholesale Trade; Business Services; and Insurance. The industries reporting the highest rates of inventory decreases in July are: Transportation; Utilities; Entertainment; Mining; and Public Administration.
|% Higher||% Same||% Lower||Index|
Prices paid by non-manufacturing organizations for purchased materials and services increased in July for the 28th consecutive month but at a slower rate of increase than in June. ISM's Non-Manufacturing Prices Index for July declined to 73.1 percent, down 1.5 percentage points from the record 74.6 percent registered for June. In July, the percentage of members reporting higher prices decreased 7 percentage points to 45 percent from 52 percent in June, the proportion indicating no change rose 5 percentage points to 50 percent, and the number who noted lower prices increased 2 percentage points to 5 percent.
The industries reporting the highest rates of increase in prices paid in July are: Mining; Construction; Agriculture; Retail Trade; and Wholesale Trade. No industry is reporting price decreases in July.
|Prices||% Higher||% Same||% Lower||Index|
ISM's Non-Manufacturing Backlog of Orders Index registered 55 percent in July. This is a decrease of 0.5 percentage point from June's 55.5 percent and represents the 15th consecutive month of growth in order backlogs. Of the total respondents in July, 43 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments on backlogs of orders include: "Raw materials are becoming harder to find from our manufacturers, and if found, prices are higher"; "Material backorders from suppliers"; "Longer leadtimes with Asian suppliers"; and "Release of some backordered steel products has increased ability to fill orders."
The industries reporting the highest rates of growth in backlog of orders in July are: Agriculture; Communication; Business Services; Construction; and Wholesale Trade. The industries reporting a decline of order backlogs in July are: Entertainment; Finance & Banking; Retail Trade; Public Administration; and Transportation.
|% Higher||% Same||% Lower||Index|
Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically-based personnel increased for the 12th consecutive month in July. The New Export Orders Index for July is 55.5 percent compared to June's 59.5 percent, indicating a slower rate of growth in July compared to June. Of the total respondents in July, 76 percent indicated they either do not perform, or do not separately measure, orders for work outside the United States.
The industries reporting the highest increases in new export orders in July are: Construction; Entertainment; Transportation; Communication; and Wholesale Trade. The industries reporting decreases in new export orders in July are: Public Administration and Retail Trade.
|% Higher||% Same||% Lower||Index|
In July, the ISM Imports Index registered 60.5 percent, 4 percentage points higher than the 56.5 percent reported in June. This indicates that use of imported materials by non-manufacturing industries increased at a faster rate in July than in June. July's index marks the 15th consecutive month of import growth. In July, 65 percent of respondents reported that they do not use or do not track the use of imported materials.
The industries reporting the highest rates of increase in the use of imports in July are: Construction; Business Services; Utilities; Wholesale Trade; and Retail Trade. The industries reporting decreased use of imports in July are: Public Administration and Entertainment.
|Imports||% Higher||% Same||% Lower||Index|
The ISM Non-Manufacturing Inventory Sentiment Index in July registered 64 percent, a 3.5 percentage point increase from the 60.5 percent reported in June. This indicates that non-manufacturing purchasing and supply executives feel more discomfort with current levels of inventory in July than they did during June. In July, 36 percent of respondents felt their inventories were too high, 8 percent indicated their inventories were too low, and 56 percent said that their inventories were about right.
The industries reporting the highest rates of feeling that their inventories are too high in July are: Transportation; Construction; Communication; Insurance; and Wholesale Trade. No industry is reporting that its inventories are too low in July.
|% Too High||% About Right||% Too Low||Index|
*Other Services include:
Hotels, Rooming Houses, Camps, and Other Lodging Places; Personal Services; Automotive Repair, Services, and Parking; Miscellaneous Repair Services; Educational Services; Social Services; Museums, Art Galleries, and Botanical and Zoological Gardens; Membership Organizations; Engineering, Accounting, Research, Management, and Related Services; and Miscellaneous Services.
Cement/Concrete — 3rd month; Copier Paper; Electronic Parts/Products; Laboratory Materials and Supplies; Paper; Steel — 6th month; Steel Products — 5th month.
Alcohol; Aluminum — 7th month; Beef* — 4th month; Building Materials — 2nd month; Chicken — 4th month; Computers and Accessories; Copier Paper; Copper* — 11th month; Corrugated — 3rd month; Dairy Products* — 4th month; #2 Diesel Fuel — 8th month; Energy; Fasteners; Fine Papers; Food — 3rd month; Fuel* — 8th month; Fuel Surcharges; Furniture; Gasoline* — 8th month; #2 Heating Oil; Lumber; Medical Supplies; Natural Gas — 3rd month; Paper — 6th month; Paper Commodities; Paper Products — 5th month; Petroleum-Based Products — 4th month; Plastic — 7th month; Plastic Products — 2nd month; Polyethylene Items (large variety) — 2nd month; Printed Materials — 2nd month; Roof Shingles — 3rd month; Roofing Materials — 2nd month; Stainless Steel Products; Steel — 9th month; Steel Products (large variety) — 5th month; Switches/Switchgear; Transportation — 3rd month; Unleaded Gasoline* — 7th month.
Beef*; Butter/Butterfat Items — 2nd month; Cheese — 2nd month; Computer Systems and Peripherals — 3rd month; Dairy Products*; Fuels*; Gasoline* — 2nd month; PVC Material, Fittings, Pipe; Unleaded Gasoline*.
*Reported as both up and down in price
The Non-Manufacturing ISM Report On Business® is based on data compiled from monthly replies to questions asked of more than 370 purchasing and supply executives in over 62 different industries representing nine divisions from the Standard Industrial Classification (SIC) categories. Membership of the Business Survey Committee is diversified by SIC category and is based on each industry's contribution to Gross Domestic Product (GDP).
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, the net difference between the number of responses in the positive economic direction (higher and slower for Supplier Deliveries) and the negative economic direction (lower and faster for Supplier Deliveries). Responses represent raw data and are never changed. Data is seasonally adjusted for Business Activity, New Orders, Prices, and Employment. The remaining indexes have not indicated significant seasonality.
A weighted composite index similar to the PMI that is so popular in the Manufacturing ISM Report On Business® is not available. Several years of data will need to be developed before that type of non-manufacturing indicator can be developed. 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, 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 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.
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 world's leading educator of supply management professionals and is a valuable resource for decision makers in major markets, companies, and government.
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 2004 data will be released at 10:00 a.m. (ET) on September 3, 2004.