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FOR RELEASE: October 4, 2006

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


September 2006 Non-Manufacturing ISM Report On Business®

Business Activity at 52.9%

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 September 2006.

New Orders Index at 57.2%
Employment Index at 53.6%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased at a slower rate in September 2006, 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; and senior vice president — supply management for Hilton Hotels Corporation. "Non-manufacturing business activity increased for the 42nd consecutive month in September," Nieves said. He added, "Business Activity increased at a slower rate in September than in August. Employment, New Orders, New Export Orders, Supplier Deliveries, Backlog of Orders and Inventory Sentiment increased at a faster rate. Ten of 18 non-manufacturing industry sectors report increased activity in September. Members' comments in September are mixed concerning current business conditions. The overall economy, interest rates and security issues are areas of concern. The Prices Index decreased 15.7 percentage points this month to 56.7 percent. The overall indication in September is continued economic growth in the non-manufacturing sector but at a slower pace than in August."

TOP PERFORMING INDUSTRIES

The 10 industries reporting growth in September — listed in order — are: Mining; Retail Trade; Educational Services; Health Care & Social Assistance; Utilities; Wholesale Trade; Public Administration; Professional, Scientific & Technical Services; Finance & Insurance; and Management of Companies & Support Services. The two industries reporting activity the same as last month are: Agriculture, Forestry, Fishing & Hunting; and Information. The six industries reporting decreased activity from August to September are: Transportation & Warehousing; Other Services*; Real Estate, Rental & Leasing; Construction; Arts, Entertainment & Recreation; and Accommodation & Food Services.

WHAT RESPONDENTS ARE SAYING ...
  • "Market is still at the same slow pace as the last two months with the next two months leading to be the same. Materials and labor are plentiful and are assisting in controlling costs." (Construction)
  • "Business conditions getting better on lower oil prices." (Agriculture, Forestry, Fishing & Hunting)
  • "Generally optimistic about current economic activity." (Educational Services)
  • "High interest rates are affecting loan volume." (Finance & Insurance)
  • "Business activities lower in September 2006." (Information)
  • "Our company profile remains positive with income reports and projections remaining above normal." (Wholesale Trade)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
SEPTEMBER 2006
  Non-Manufacturing Manufacturing
Index Series
Index
Sept		 Series
Index
August		 Percent
Point
Change		 Direction Rate
of
Change		 Trend**
(Months)		 Series
Index
Sept		 Series
Index
August		 Percent
Point
Change
Business Activity/Production 52.9 57.0 -4.1 Increasing Slower 42 56.1 56.6 -0.5
New Orders 57.2 52.1 +5.1 Increasing Faster 42 54.2 54.2 0
Employment 53.6 51.4 +2.2 Increasing Faster 26 49.4 54.0 -4.6
Supplier Deliveries 54.0 53.5 +0.5 Slowing Faster 61 54.1 55.0 -0.9
Inventories 50.5 51.5 -1.0 Increasing Slower 11 46.4 50.2 -3.8
Prices 56.7 72.4 -15.7 Increasing Slower 54 61.0 73.0 -12.0
Backlog of Orders 53.0 49.5 +3.5 Growing From Contracting 1 46.5 51.5 -5.0
New Export Orders 59.0 53.0 +6.0 Increasing Faster 15 55.3 55.7 -0.4
Imports 55.0 60.0 -5.0 Increasing Slower 8 56.0 54.0 +2.0
Inventory Sentiment 63.5 59.0 +4.5 "Too High" Faster 112 N/A N/A N/A
Customers' Inventories N/A N/A N/A       49.0 46.0 +3.0

* 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 except for Backlog of Orders, Prices, Imports and Customers' Inventories.
** Number of months moving in current direction


COMMODITIES REPORTED UP / DOWN IN PRICE, and IN SHORT SUPPLY

Commodities Up in Price

Aluminum (2); Aluminum Products; Beef; Brass (2); Bronze; Computer Products & Supplies; Copper (37); Copy Paper (8); Diesel Fuel*; Fiberglass Pipe/Products (2); Freight/Shipping/Transportation Costs (7); Hotel Costs (4); HVAC Equipment; Nickel; Office Supplies; Overnight Shipping; Paper (32); Paper Products (8); Plastic Bags; Poly Products (2); Roofing Materials (6); Rubber; Stainless Steel; Stainless Steel Products (2); and Wire & Cable.

Commodities Down in Price

Cardboard; Copper Products; Diesel Fuel*; # 1 Diesel Fuel; # 2 Diesel Fuel; Fuel; Gasoline; # 2 Heating Fuel; Labor; Lumber — Pine, Spruce and Treated (4); and Natural Gas.

Commodities in Short Supply

Aluminum (2); Cement/Concrete; Copper (2); Fiberglass Pipe/Fittings (2); Transformers (2); and Vaccines.

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

*Commodities reported both Up and Down in price.


SEPTEMBER 2006 NON-MANUFACTURING INDEX SUMMARIES

Business Activity

ISM's Non-Manufacturing Business Activity Index in September registered 52.9 percent compared to the 57 percent registered in August, indicating a slower rate of growth in business activity in September. The implication is that non-manufacturing business activity is continuing to increase for the 42nd consecutive month, but at a slower rate. The slower rate of growth indicated by this index is not reflected in some of the other indexes this month as evidenced by a 5.1 percentage point increase in the New Orders Index and a 2.2 percentage point increase in the Employment Index. This month, 10 sectors report increased business activity, six are reporting decreased activity, and two are indicating unchanged activity compared to August.

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


Business Activity		 %
Higher		 %
Same		 %
Lower
Index
September 2006 25 56 19 52.9
August 2006 27 56 17 57.0
July 2006 30 52 18 54.8
June 2006 36 49 15 57.0


THE LAST 12 MONTHS
Month Business
Activity Index		   Month Business
Activity Index
Sep 2006 52.9   Mar 2006 60.5
Aug 2006 57.0   Feb 2006 60.1
Jul 2006 54.8   Jan 2006 56.8
Jun 2006 57.0   Dec 2005 61.0
May 2006 60.1   Nov 2005 59.3
Apr 2006 63.0   Oct 2005 59.2
Average for 12 months – 58.5
High – 63.0
Low – 52.9

New Orders

ISM's Non-Manufacturing New Orders Index increased to 57.2 percent in September from the 52.1 percent registered in August. This indicates continued expansion of new orders. Comments from members include: "New work starting up" and "Some customers are looking at capital expenditures."

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


New Orders		 %
Higher		 %
Same		 %
Lower
Index
September 2006 27 57 16 57.2
August 2006 22 60 18 52.1
July 2006 28 58 14 55.6
June 2006 36 48 16 56.6

Employment

Employment activity in the non-manufacturing sector increased at a faster rate in September compared to August. This was the 26th consecutive monthly increase in non-manufacturing employment. ISM's Non-Manufacturing Employment Index for September is 53.6 percent, an increase of 2.2 percentage points from the 51.4 percent reported in August. Seven industries are reporting increased employment, seven are reporting a decrease, and four indicate employment is unchanged from August. Comments from respondents include: "Continue to fill backlog of available positions"; "Prepping for new fiscal year"; and "Increase in business."

The industries reporting growth in employment in September are: Other Services*; Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Wholesale Trade; Educational Services; Finance & Insurance; and Public Administration. The seven industries reporting a reduction in employment in September are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Information; Professional, Scientific & Technical Services; Management of Companies & Support Services; Utilities; and Retail Trade.


Employment		 %
Higher		 %
Same		 %
Lower
Index
September 2006 17 69 14 53.6
August 2006 15 72 13 51.4
July 2006 19 75 6 54.5
June 2006 22 66 12 52.0

Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations was slower for the 61st consecutive month in September. The index registered 54 percent, 0.5 percentage point higher than in August, indicating that deliveries are slowing at a faster rate than in August. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in September include: "Trucks are scarce" and "Slow deliveries continue."

The industries reporting slowing in supplier deliveries in September are: Mining; Transportation & Warehousing; Utilities; Other Services*; Accommodation & Food Services; Information; Wholesale Trade; Retail Trade; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Management of Companies & Support Services. The one industry reporting faster supplier deliveries in September is Real Estate, Rental & Leasing.


Supplier Deliveries		 %
Slower		 %
Same		 %
Faster
Index
September 2006 12 84 4 54.0
August 2006 13 81 6 53.5
July 2006 13 83 4 54.5
June 2006 17 78 5 56.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 50.5 percent in September, a decrease of one percentage point compared to August. This is the 11th consecutive month of reported increases in non-manufacturing inventories. Of the total respondents in September, 29 percent indicate they do not have inventories or do not measure them. Comments from members include: "Focused inventory reduction project (non-sales related)"; and "Business activity is down, so goes our inventory."

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


Inventories		 %
Higher		 %
Same		 %
Lower
Index
September 2006 22 57 21 50.5
August 2006 20 63 17 51.5
July 2006 21 64 15 53.0
June 2006 22 59 19 51.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in September for the 54th consecutive month. ISM's Non-Manufacturing Prices Index for September is 56.7 percent, 15.7 percentage points lower than August's index of 72.4 percent. In September, the percentage of respondents reporting higher prices decreased 17 percent to 26 percent compared to August at 43 percent, the proportion indicating no change increased from 54 percent in August to 61 percent in September, and the percentage of respondents noting lower prices increased from 3 percent in August to 13 percent in September.

The industries reporting an increase in prices paid in September are: Mining; Utilities; Retail Trade; Wholesale Trade; Transportation & Warehousing; Information; Educational Services; Accommodation & Food Services; Professional, Scientific & Technical Services; and Finance & Insurance. The four industries reporting a decrease in prices in September are: Public Administration; Management of Companies & Support Services; Real Estate, Rental & Leasing; and Construction.


Prices		 %
Higher		 %
Same		 %
Lower
Index
September 2006 26 61 13 56.7
August 2006 43 54 3 72.4
July 2006 51 45 4 74.8
June 2006 50 46 4 73.9

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index registered 53 percent in September, 3.5 percentage points higher than the 49.5 percent reported in August. This indicates that order backlogs are once again increasing after one month of contraction. Of the total respondents in September, 46 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments on backlogs of orders include: "Summer rush is over, we get our orders faster"; and "Caught short on inventory as business increased."

The industries reporting an increase in order backlogs in September are: Utilities; Retail Trade; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Public Administration; Wholesale Trade; and Professional, Scientific & Technical Services. The three industries reporting no change are: Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; and Information. The six industries reporting a decrease in order backlogs in September are: Accommodation & Food Services; Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Construction; Finance & Insurance; and Other Services*.


Backlog of Orders		 %
Higher		 %
Same		 %
Lower
Index
September 2006 22 62 16 53.0
August 2006 17 65 18 49.5
July 2006 22 68 10 56.0
June 2006 25 61 14 55.5

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 increased for the 15th consecutive month in September. The September index marks 37 of the past 38 months that the index has exhibited growth. The New Export Orders Index for September is 59 percent, compared to August's index of 53 percent. Of the total respondents in September, 70 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The industries reporting an increase in new export orders in September are: Mining; Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; Management of Companies & Support Services; Information; Finance & Insurance; Retail Trade; and Wholesale Trade. The two industries reporting a decrease in new export orders in September are: Transportation & Warehousing and Public Administration.

New
Export Orders		 %
Higher		 %
Same		 %
Lower
Index
September 2006 26 66 8 59.0
August 2006 20 66 14 53.0
July 2006 22 68 10 56.0
June 2006 26 57 17 54.5

Imports

In September, the ISM Non-Manufacturing Imports Index registered 55 percent, 5 percentage points lower than August's index of 60 percent, indicating that use of imports increased in September for the eighth consecutive month, but at a slower rate than in August. In September, 65 percent of respondents reported that they do not use or do not track the use of imported materials.

The industries reporting an increase in the use of imports in September are: Mining; Construction; Accommodation & Food Services; Information; Management of Companies & Support Services; and Retail Trade. The three industries reporting a decrease in imports for the month of September are: Public Administration; Arts, Entertainment & Recreation; and Wholesale Trade.


Imports		 %
Higher		 %
Same		 %
Lower
Index
September 2006 21 68 11 55.0
August 2006 22 76 2 60.0
July 2006 25 71 4 60.5
June 2006 20 71 9 55.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in September registered 63.5 percent, 4.5 percentage points higher than the 59 percent reported in August. This indicates that non-manufacturing purchasing and supply executives feel a greater degree of discomfort with current levels of inventory in September than they did during August. In September, 32 percent of respondents felt their inventories were too high, 5 percent indicated their inventories were too low, and 63 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in September are: Other Services*; Professional, Scientific & Technical Services; Construction; Transportation & Warehousing; Information; Real Estate, Rental & Leasing; Finance & Insurance; Arts, Entertainment & Recreation; Wholesale Trade; Retail Trade; Public Administration; and Utilities. No industry reported that their inventories were too low in September.


Inventory Sentiment		 %Too
High		 %About
Right		 %Too
Low
Index
September 2006 32 63 5 63.5
August 2006 28 62 10 59.0
July 2006 28 64 8 60.0
June 2006 30 66 4 63.0

*Other Services include:
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.

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; Other Services*; and Public Administration.

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.

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 October 2006 data will be released at 10:00 a.m. (ET) on Friday, November 3, 2006.