FOR RELEASE: October 3, 2003
|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 September 2003.
(Tempe, Arizona) — Business activity in the non-manufacturing sector increased in September 2003, 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 sixth consecutive month in September," Kauffman said. He added, "Also in September, New Orders, Order Backlogs, Prices, Imports, and Exports increased."
Purchasing and supply executives report that business activity continued to increase in September in the non-manufacturing sector, but at a somewhat lower rate than in August. The Business Activity Index, at 63.3 percent, is still relatively high. Only the July and August 2003 indexes of 65.1 percent exceed the September value over the history of ISM's Non-Manufacturing Business Survey. September's index thus indicates continued strong growth across non-manufacturing industries. In the non-manufacturing sector, 14 industry groups grew in September, while none contracted and two reported no change from August. Increased business activity in September was reported by 38 percent of members, the same as in August and July. Reduced activity was reported by 9 percent of members compared to 13 percent in August. In September, the remaining 53 percent of members indicated no change in business activity compared to 49 percent in August.
The Backlog of Orders Index rose by 5.5 percentage points to 57 percent, indicating growth in order backlogs for the fifth consecutive month and at a faster rate of increase than in August. The September New Orders Index decreased from 67.6 percent in August to 59.9 percent in September. This reflects a slower rate of increase of new orders in September compared to August. Members reported that the prices they pay increased in September for the fourth consecutive month. September's Prices Index is 60.1 percent, up significantly from 55.7 percent in August. This month, 13 industry groups reported paying higher prices compared to August, two reported paying the same, and one industry group reported paying lower prices. Members' general comments on business in September continue to indicate optimism concerning economic activity. Particular comments include: "Business appears to be improving. More and larger requests for quotation are being sent in"; "Still very tough competition, but the future is looking better"; "Business continues to be affected by state budget shortfalls"; "Business continues in an upward spiral"; and "Still maintaining tight expense control even though our sales are improving and our business activity is increasing."
In addition, Inventories decreased for the fourth consecutive month. With regard to Inventory Sentiment, members reported a decreased level of concern that inventories are too high. New Export Orders increased for the second consecutive month, Imports increased for the fifth consecutive month, and Employment decreased after three months of increases. However, the increases and decreases in the Employment Index over the past four months have all been in the narrow range of index values of 49.1 percent to 51 percent. With an index value of 50 percent indicating no change, the increases and decreases during this period have all been relatively small. Supplier Deliveries indicated slower performance for the 25th consecutive month.
Significant reports of commodities in short supply or up or down in price in September indicate that brass and brass fittings and plywood are the only commodities in short supply. Price increases are reported for air fares; air freight; apparel; beef; cheese; construction materials; copper; dairy products; #2 diesel fuel; food and food products; freight fuel surcharges; fuel; gasoline; lumber; OSB (Oriented Strand Board); paint; petroleum-based products; plastic; plywood; steel, steel pipe, steel plate; travel costs; and unleaded gasoline. Building materials; computers; and paper were reported down in price.
& Rate of
|Business Activity/ Production||63.3||65.1||-1.8||Increasing slower||57.3||61.6||-4.3|
|New Orders||59.9||7.6||-7.7||Increasing slower||60.4||59.6||+0.8|
|Employment||49.1||51.0||-1.9||Decreasing from increasing||45.7||45.9||-0.2|
|Supplier Deliveries||55.0||52.5||+2.5||Slowing faster||52.4||53.3||-0.9|
|Backlog of Orders||57.0||51.5||+5.5||Increasing faster||52.5||51.5||+1.0|
|New Export Orders||56.0||58.5||-2.5||Increasing slower||52.9||55.3||-2.4|
|Inventory Sentiment||60.5||62.0||-1.5||Lesser feeling of "too high"||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 September decreased slightly but remained relatively high at a level of 63.3 percent. This indicates continued increase in business activity compared to August. September's index continues the period of growth in non-manufacturing business activity begun in April following March's dip into contraction territory (below an index value of 50). The September index is the second highest since the inception of ISM's Non-Manufacturing Business Survey in September 1997, exceeded only by the July and August 2003 indexes. With the exception of March 2003, growth in business activity has been reported by ISM members every month beginning with February 2002. This month 14 sectors reported increased business activity, no sectors reported decreased activity, and two reported unchanged activity compared to August.
The industries reporting the highest rates of growth of business activity in September are: Entertainment; Other Services*; Wholesale Trade; Insurance; Transportation; and Utilities. There are no industries reporting contraction of business activity in September.
|Business Activity||% Higher||% Same||% Lower||Index|
ISM's Non-Manufacturing New Orders Index decreased to 59.9 percent in September from 67.6 percent in August. This indicates continued expansion of new orders but at a slower rate of growth than in August. Comments from members include: "We have succeeded in winning new construction projects"; "Activity has picked up after summer vacations ended"; "Economy improving"; and "Some improvement in sales, but generally customers are placing more frequent but smaller orders."
The industries reporting the highest rates of growth of new orders in September are: Entertainment; Other Services*; Wholesale Trade; Insurance; and Communication. The industries reporting contraction of new orders in September are: Agriculture; Mining; Real Estate; and Transportation.
|New Orders||% Higher||% Same||% Lower||Index|
Employment in the non-manufacturing sector in September contracted after three consecutive months of increase. ISM's Non-Manufacturing Employment Index for September is 49.1 percent compared to 51 percent in August. Comments from respondents include: "Should increase slightly next month"; "Number of temporary positions have been eliminated in favor of direct hires in the clinical staffing areas"; "Retirement, extended medical leave, and dismissal"; "Added staff for new stores"; and "Departures not being replaced."
The industries reporting growth in employment in September are: Entertainment; Construction; Other Services*; Wholesale Trade; Health Services; Insurance; and Retail Trade. Industries reporting the highest rates of reduction in employment in September are: Mining; Transportation; Agriculture; Finance & Banking; and Real Estate.
|Employment||% Higher||% Same||% Lower||Index|
The delivery performance of suppliers to non-manufacturing organizations was slower for the 25th consecutive month in September. The index registered 55 percent, an increase of 2.5 percentage points from the 52.5 percent reported in August. A reading above 50 percent indicates slower deliveries. The September index is the highest that the Supplier Deliveries Index has been since August of 2000 when it was also 55 percent. Comments from purchasing and supply executives concerning supplier deliveries in September include: "More orders without additional stock on hand"; "Inventory stockpiles dwindling"; "Price increase announcements have driven leadtimes for materials out. Many companies are trying to purchase before the increases take effect"; and "Suppliers running leaner inventories."
The industries reporting the highest rates of slowing in supplier deliveries in September are: Wholesale Trade; Entertainment; Utilities; Business Services; Finance & Banking; and Retail Trade. The only industry reporting faster supplier deliveries in September is Other Services*.
|Supplier Deliveries||% Slower||% Same||% Faster||Index|
ISM's Non-Manufacturing Inventories Index registered 47.5 percent in September, 1.5 percentage points lower than the 49 percent reported in August. September's index reflects the fourth consecutive monthly decrease after two consecutive months in which material inventories maintained by non-manufacturing organizations increased. Of the total respondents in September, 30 percent indicate they do not have inventories or do not measure them. Comments from members include: "Deliberate reduction from above desired levels"; "Consolidation of warehouses"; "Replenishment not keeping up with demand"; and "Cutting back on inventory levels."
The industries reporting inventory increases in September are: Entertainment; Insurance; Retail Trade; and Other Services*. The industries reporting the highest rates of inventory decreases in September are: Mining; Utilities; Real Estate; Public Administration; and Business Services.
|Inventory Change||% Higher||% Same||% Lower||Index|
Prices paid by non-manufacturing organizations for purchased materials and services increased in September for the fourth consecutive month. ISM's Non-Manufacturing Prices Index for September is 60.1 percent, an increase of 4.4 percentage points from the 55.7 percent registered for August. In September, the percentage of members reporting higher prices increased 7 percentage points to 23 percent from 16 percent in August, the proportion indicating no change dropped 7 percentage points to 70 percent, and the number who noted lower prices remained at 7 percent.
The industries reporting the highest rates of increase in prices paid in September are: Entertainment; Mining; Construction; Agriculture; and Wholesale Trade. The only industry reporting price decreases in September is Public Administration.
|Prices||% Higher||% Same||% Lower||Index|
ISM's Non-Manufacturing Backlog of Orders Index registered 57 percent in September. This is an increase of 5.5 percentage points from August's 51.5 percent and represents the fifth consecutive month of growth in order backlogs. Of the total respondents in September, 38 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments on backlogs of orders include: "Recent awards of new contracts"; "Capacity"; "Due to recent rains, residential contractors have been able to increase backlogs"; and "Tighter supplier inventories; longer freight carrier leadtimes."
The industries reporting the highest rates of growth in backlog of orders in September are: Insurance; Entertainment; Wholesale Trade; Construction; and Business Services. The industries reporting a decline of order backlogs in September are: Communication; Other Services*; and Finance & Banking.
|Backlog of Orders||% 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 second consecutive month in September. The New Export Orders Index for September is 56 percent compared to August's 58.5 percent. Of the total respondents in September, 76 percent indicated they either do not perform, or do not separately measure, orders for work outside the United States.
The industries reporting increases in new export orders in September are: Real Estate; Public Administration; Other Services*; Business Services; and Wholesale Trade. The only industry reporting decreases in new export orders in September is Mining.
|New Export Orders||% Higher||% Same||% Lower||Index|
In September, the ISM Imports Index registered 55 percent, down from 60 percent in August. This indicates that use of imported materials by non-manufacturing industries increased at a slower rate in September than in August. September's index marks the fifth consecutive month of import growth after April's index value of 50 percent indicated no change in imports compared to March. In September, 66 percent of respondents reported that they do not use or do not track use of imported materials.
The industries reporting increases in use of imports in September are: Entertainment; Business Services; Finance & Banking; Other Services*; Wholesale Trade; and Retail Trade. There were no industries reporting decreased use of imports in September.
|Imports||% Higher||% Same||% Lower||Index|
The ISM Non-Manufacturing Inventory Sentiment Index in September registered 60.5 percent, 1.5 percentage points lower than the 62 percent reported for August. This indicates that non-manufacturing purchasing and supply executives feel a lesser degree of discomfort with current levels of inventory in September than they did during August. In September, 26 percent of respondents felt their inventories were too high, 5 percent indicated their inventories were too low, and 69 percent said that their inventories were about right.
The industries reporting the highest rates of feeling that their inventories are too high in September are: Real Estate; Wholesale Trade; Agriculture; Utilities; Finance & Banking; Health Services; and Other Services*. There are no industries reporting that their inventories are too low in September.
|Inventory Sentiment||% 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.
Brass and Brass Fittings; Plywood.
Air Fares — 2nd month; Air Freight; Apparel; Beef — 9th month; Cheese; Construction Materials; Copper; Dairy Products — 3rd month; #2 Diesel Fuel — 12th month; Food and Food Products; Freight Fuel Surcharges; Fuel — 9th month; Gasoline — 3rd month; Lumber; OSB (Oriented Strand Board); Paint; Petroleum-Based Products; Plastic; Plywood; Steel, Steel Pipe, and Steel Plate; Travel Costs; Unleaded Gasoline.
Building Materials; Computers; Paper — 2nd month.
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 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 October 2003 data will be released at 10:00 a.m. (ET) on November 5, 2003.