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March 2007 Non-Manufacturing ISM Report On Business®

FOR RELEASE: April 4, 2007


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


Business Activity at 52.4%

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 March 2007.


New Orders Index at 53.8%
Employment Index at 50.8%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased at a slower rate in March 2007, 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 48th consecutive month in March," Nieves said. He added, "Business Activity, New Orders and Employment increased at a slower rate in March than in February. The Prices Index increased 9.5 percentage points this month to 63.3 percent. Ten non-manufacturing industries reported increased activity in March. Members' comments in March indicate a concern with fuel costs, the economy and the impact on business conditions. The overall indication in March is continued economic growth in the non-manufacturing sector, but at a slower pace than in February."

TOP PERFORMING INDUSTRIES

The 10 industries reporting growth in March — listed in order — are: Utilities; Educational Services; Other Services*; Retail Trade; Finance & Insurance; Transportation & Warehousing; Health Care & Social Assistance; Professional, Scientific & Technical Services; Public Administration; and Construction. The four industries reporting decreased activity from February to March are: Management of Companies & Support Services; Accommodation & Food Services; Information; and Arts, Entertainment & Recreation.

WHAT RESPONDENTS ARE SAYING ...
  • "Overall core business activity is slightly slower." (Finance & Insurance)
  • "Constant increases in fuel costs seem to be causing an economic downturn. Outlook remains cautiously optimistic." (Professional, Scientific & Technical Services)
  • "Business activity seems to have slowed with some brightness on the horizon." (Wholesale Trade)
  • "Market remains stable." (Information)
  • "Business is OK but not great. We will not get the price in the market. Making our year depends upon cost control." (Agriculture, Forestry, Fishing & Hunting)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
MARCH 2007
  Non-Manufacturing Manufacturing
Index Series
Index
Mar
Series
Index
Feb
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Mar
Series
Index
Feb
Percent
Point
Change
Business Activity/Production 52.4 54.3 -1.9 Growing Slower 48 53.0 54.1 -1.1
New Orders 53.8 54.8 -1.0 Growing Slower 48 51.6 54.9 -3.3
Employment 50.8 52.2 -1.4 Growing Slower 32 48.7 51.1 -2.4
Supplier Deliveries 50.0 52.5 -2.5 Unchanged From Slowing 1 51.3 50.8 +0.5
Inventories 52.0 50.5 +1.5 Growing Faster 2 47.5 44.6 +2.9
Prices 63.3 53.8 +9.5 Increasing Faster 46 65.5 59.0 +6.5
Backlog of Orders 52.5 47.0 +5.5 Growing From Contracting 1 47.0 51.5 -4.5
New Export Orders 48.5 59.0 -10.5 Contracting From Growing 1 55.5 54.0 +1.5
Imports 50.0 54.0 -4.0 Unchanged From Growing 1 57.5 61.5 -4.0
Inventory Sentiment 63.0 61.5 +1.5 "Too High" Faster 118 N/A N/A N/A
Customers' Inventories N/A N/A N/A       48.0 53.0 -5.0

* 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

Airfare; Car Rental; Car Service; #1 Diesel Fuel; #2 Diesel Fuel (2); Electricity (2); Freight/Shipping (3); Fuel (2); Gasoline (5); Healthcare; #2 Heating Fuel; Hotel Costs (10); Lubricants; Office Supplies; Paper (38); Polyethylene; Stainless Bar; and Stretch Film.

Commodities Down in Price

No commodities are reported down in price.

Commodities in Short Supply

Building Materials; Construction Services/Contractors; Construction Materials; and Glass Bottles/Containers.

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



MARCH 2007 NON-MANUFACTURING INDEX SUMMARIES



Business Activity

ISM's Non-Manufacturing Business Activity Index in March registered 52.4 percent compared to the seasonally adjusted 54.3 percent registered in February, indicating a slower rate of growth in business activity in March. The implication is that non-manufacturing business activity is continuing to increase for the 48th consecutive month. Ten industries reported increased business activity, and four reported decreased activity for the month of March.

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


Business Activity
%
Higher
%
Same
%
Lower

Index
March 2007 30 52 18 52.4
February 2007 27 53 20 54.3
January 2007 30 45 25 59.0
December 2006 26 55 19 56.7


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Mar 2007 52.4   Sep 2006 54.6
Feb 2007 54.3   Aug 2006 56.9
Jan 2007 59.0   Jul 2006 55.7
Dec 2006 56.7   Jun 2006 56.9
Nov 2006 58.3   May 2006 59.2
Oct 2006 57.4   Apr 2006 61.1
Average for 12 months — 56.0
High — 61.1
Low — 52.4

New Orders

ISM's Non-Manufacturing New Orders Index decreased to 53.8 percent in March from the seasonally adjusted 54.8 percent registered in February. This indicates continued expansion of new orders, but at a slower rate than in February. Comments from members include: "February's business activity was lower than January and December. We are not sure if this is a seasonal trend or if there is a slowdown in the temporary labor market"; and "General slowdown."

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


New Orders
%
Higher
%
Same
%
Lower

Index
March 2007 31 48 21 53.8
February 2007 27 55 18 54.8
January 2007 27 51 22 55.4
December 2006 24 56 20 55.6

Employment

Employment activity in the non-manufacturing sector increased at a slower rate in March compared to February. This was the 32nd consecutive monthly increase in non-manufacturing employment. ISM's Non-Manufacturing Employment Index for March is 50.8 percent, a 1.4 percentage point decrease from the seasonally adjusted 52.2 percent reported in February. Eight industries reported increased employment in March, six reported a decrease, and three indicated employment is unchanged from February. Comments from respondents include: "Negative outlook on the economy"; "Open positions filled"; and "Last hiring spree before economic slowdown."

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


Employment
%
Higher
%
Same
%
Lower

Index
March 2007 17 69 14 50.8
February 2007 18 65 17 52.2
January 2007 15 69 16 51.7
December 2006 17 71 12 53.2

Supplier Deliveries

In March, the delivery performance of suppliers to non-manufacturing organizations registered 50 percent, 2.5 percentage points lower than in February. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in March include: "Trend is toward improving; however, commodity shortages still abound in distribution transformer segment"; and "Winter weather problems."

The industries reporting slowing in supplier deliveries in March are: Transportation & Warehousing; Real Estate, Rental & Leasing; Utilities; Retail Trade; Health Care & Social Assistance; Wholesale Trade; and Professional, Scientific & Technical Services. The seven industries reporting faster supplier deliveries in March are: Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Finance & Insurance; Construction; Information; Educational Services; and Public Administration.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
March 2007 8 84 8 50.0
February 2007 10 85 5 52.5
January 2007 15 77 8 53.5
December 2006 10 82 8 51.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 52 percent in March, an increase of 1.5 percentage points compared to February. Inventories are expanding for the second consecutive month after one month of contraction. Of the total respondents in March, 33 percent indicated they do not have inventories or do not measure them. Comments from members include: "Slower business activity"; "Area of concern to cut levels"; and "Sales are down, high inventory."

The industries reporting increases in inventories in March are: Agriculture, Forestry, Fishing & Hunting; Other Services*; Transportation & Warehousing; Educational Services; Utilities; Information; Real Estate, Rental & Leasing; and Retail Trade. The industries reporting decreases in inventories in March are: Finance & Insurance; Accommodation & Food Services; Arts, Entertainment & Recreation; Public Administration; Professional, Scientific & Technical Services; and Wholesale Trade.


Inventories
%
Higher
%
Same
%
Lower

Index
March 2007 24 56 20 52.0
February 2007 23 55 22 50.5
January 2007 18 58 24 47.0
December 2006 25 57 18 53.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in March for the 46th consecutive month (following the recent seasonal adjustments). ISM's Non-Manufacturing Prices Index for March is 63.3 percent, 9.5 percentage points higher than February's seasonally adjusted index of 53.8 percent. In March, the percentage of respondents reporting higher prices increased by 21 percentage points to 38 percent as compared to February. The percentage indicating no change decreased from 74 percent in February to 58 percent in March. The percentage of respondents noting lower prices decreased from 9 percent in February to 4 percent in March.

The industries reporting an increase in prices paid in March are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Wholesale Trade; Transportation & Warehousing; Retail Trade; Finance & Insurance; Utilities; Construction; Professional, Scientific & Technical Services; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; Educational Services; Management of Companies & Support Services; and Health Care & Social Assistance. The only industry reporting a decrease in prices in March is Information.


Prices
%
Higher
%
Same
%
Lower

Index
March 2007 38 58 4 63.3
February 2007 17 74 9 53.8
January 2007 23 62 15 55.2
December 2006 20 71 9 59.7

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index registered 52.5 percent in March, 5.5 percentage points higher than the 47 percent reported in February. This indicates that order backlogs are increasing after contracting for three consecutive months. Of the total respondents in March, 44 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments include: "Budget restrictions are limiting funds available for purchasing thus creating a backlog of requests"; "In-house orders backlog is down approximately 20 percent, but will be back up next month (starting new orders). Forecast (sales) backlog hours remain the same."

The industries reporting an increase in order backlogs in March are: Other Services*; Utilities; Real Estate, Rental & Leasing; Accommodation & Food Services; Health Care & Social Assistance; Retail Trade; Construction; and Public Administration. The four industries reporting a decrease in order backlogs in March are: Management of Companies & Support Services; Information; Wholesale Trade; and Finance & Insurance.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
March 2007 20 65 15 52.5
February 2007 15 64 21 47.0
January 2007 17 64 19 49.0
December 2006 13 70 17 48.0

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 contracted in March for the first time after 20 consecutive months of expansion. The New Export Orders Index for March is 48.5 percent, compared to February's index of 59 percent. Of the total respondents in March, 74 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 March are: Arts, Entertainment & Recreation; Other Services*; Retail Trade; and Finance & Insurance. The four industries reporting a decrease in new export orders in March are: Accommodation & Food Services; Information; Professional, Scientific & Technical Services; and Wholesale Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
March 2007 18 61 21 48.5
February 2007 25 68 7 59.0
January 2007 29 52 19 55.0
December 2006 32 59 9 61.5

Imports

In March, the ISM Non-Manufacturing Imports Index registered 50 percent, 4 percentage points lower than February's index of 54 percent. In March, 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 March are: Construction; Professional, Scientific & Technical Services; Retail Trade; and Wholesale Trade. The three industries reporting a decrease in imports for the month of March are: Information; Accommodation & Food Services; and Transportation & Warehousing.


Imports
%
Higher
%
Same
%
Lower

Index
March 2007 13 74 13 50.0
February 2007 18 72 10 54.0
January 2007 14 76 10 52.0
December 2006 30 64 6 62.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in March registered 63 percent, 1.5 percentage points higher than the 61.5 percent reported in February. This indicates that non-manufacturing purchasing and supply executives feel a greater discomfort with current levels of inventory in March than they did during February. In March, 32 percent of respondents felt their inventories were too high, 6 percent indicated their inventories were too low, and 62 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in March are: Agriculture, Forestry, Fishing & Hunting; Other Services*; Management of Companies & Support Services; Wholesale Trade; Construction; Information; Real Estate, Rental & Leasing; Retail Trade; Transportation & Warehousing; Professional, Scientific & Technical Services; and Accommodation & Food Services.

The two industries reporting that their inventories are too low are: Utilities and Public Administration.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
March 2007 32 62 6 63.0
February 2007 30 63 7 61.5
January 2007 35 61 4 65.5
December 2006 34 59 7 63.5

*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 April 2007 data will be released at 10:00 a.m. (ET) on Thursday, May 3, 2007.


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