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December 2007 Non-Manufacturing ISM Report On Business®

FOR RELEASE: January 4, 2008


Contact: Andrea Waas, APR
ISM, Vice President
Tempe, Arizona
800/888-6276, Ext. 3009
E-mail: awaas@ism.ws

Business Activity at 53.9%

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 December 2007.


New Orders Index at 53.5%
Employment Index at 52.1%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased at a slower rate in December than in November, 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 57th consecutive month in December," Nieves said. He added, "The Business Activity Index decreased 0.2 percentage point to 53.9 percent for the month of December. The New Orders Index increased to 53.5 percent and the Employment Index increased to 52.1 percent. The Prices Index decreased to 72.7 percent in December. Five non-manufacturing industries reported increased activity in December. Members' comments in December vary by industry segment and remain concerned about the economy. The overall indication in December is continued economic growth in the non-manufacturing sector, but at a slightly slower pace than in November."

TOP PERFORMING INDUSTRIES

The five industries reporting growth in December — listed in order — are: Retail Trade; Information; Professional, Scientific & Technical Services; Construction; and Health Care & Social Assistance. The eight industries reporting decreased activity from November to December are: Management of Companies & Support Services; Other Services*; Accommodation & Food Services; Real Estate, Rental & Leasing; Finance & Insurance; Wholesale Trade; Educational Services; and Arts, Entertainment & Recreation.

WHAT RESPONDENTS ARE SAYING ...
  • "Market pressures in the fourth quarter continue to slow business and limit growth going into 2008 in the financial services sector." (Finance & Insurance)
  • "Higher energy costs affecting all facets of our business." (Agriculture, Forestry, Fishing & Hunting)
  • "Anticipating modest growth in revenues in first two quarters of 2008 if interest rates do not rise and inflation remains in check." (Professional, Scientific & Technical Services)
  • "There continues to be concern regarding energy, commodity, credit, transportation, etc. These issues are consistent topics of conversation." (Retail Trade)
  • "General market conditions have not changed since last month. Overall, the supply and demand is still out of balance with pricing being stable." (Construction)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
DECEMBER 2007
  Non-Manufacturing Manufacturing
Index Series
Index
Dec.
Series
Index
Nov.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Dec.
Series
Index
Nov.
Percent
Point
Change
Business Activity/Production 53.9 54.1 -0.2 Growing Slower 57 47.3 51.9 -4.6
New Orders 53.5 51.1 +2.4 Growing Faster 57 45.7 52.6 -6.9
Employment 52.1 50.8 +1.3 Growing Faster 4 48.0 47.8 +0.2
Supplier Deliveries 52.5 51.5 +1.0 Slowing Faster 2 53.3 51.7 +1.6
Inventories 50.5 50.5 0.0 Growing Same 2 45.5 46.9 -1.4
Prices 72.7 76.5 -3.8 Increasing Slower 55 68.0 67.5 +0.5
Backlog of Orders 49.0 48.5 +0.5 Contracting Slower 4 43.0 41.5 +1.5
New Export Orders 50.0 55.5 -5.5 Unchanged From Growing 1 52.5 58.5 -6.0
Imports 50.5 49.5 +1.0 Growing From Contracting 1 48.0 47.5 +0.5
Inventory Sentiment 64.5 61.5 +3.0 "Too High" Faster 127 N/A N/A N/A
Customers' Inventories N/A N/A N/A       51.5 49.0 +2.5

* 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

Carbon Steel Pipe; Copier Paper; Corn; Diesel Fuel (3); #2 Diesel Fuel (3); Electric; Freight; Freight Fuel Surcharges (2); Fuel (11); Gasoline (4); #2 Heating Fuel (3); Paper (2); Plastic Bags; Poly Bags; Polyethylene Films; Stainless Steel; Stretch Film; Travel Costs; and Wheat.

Commodities Down in Price

Lumber is the only commodity reported down in price.

Commodities in Short Supply

Coated Paper; Helium; and Labor — Skilled, Temporary.

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



DECEMBER 2007 NON-MANUFACTURING INDEX SUMMARIES



Business Activity

ISM's Non-Manufacturing Business Activity Index in December registered 53.9 percent, indicating a slightly slower rate of growth in business activity compared to November. The implication is that non-manufacturing business activity is continuing to increase for the 57th consecutive month. Five industries reported increased business activity, and eight industries reported decreased activity for the month of December.

The industries reporting growth of business activity in December are: Retail Trade; Information; Professional, Scientific & Technical Services; Construction; and Health Care & Social Assistance. The eight industries reporting decreased activity from November to December are: Management of Companies & Support Services; Other Services*; Accommodation & Food Services; Real Estate, Rental & Leasing; Finance & Insurance; Wholesale Trade; Educational Services; and Arts, Entertainment & Recreation.


Business Activity
%
Higher
%
Same
%
Lower

Index
December 2007 24 54 22 53.9
November 2007 29 51 20 54.1
October 2007 29 51 20 55.8
September 2007 25 56 19 54.8


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Dec 2007 53.9   Jun 2007 60.7
Nov 2007 54.1   May 2007 59.7
Oct 2007 55.8   Apr 2007 56.0
Sept 2007 54.8   Mar 2007 52.4
Aug 2007 55.8   Feb 2007 54.3
Jul 2007 55.8   Jan 2007 59.0
Average for 12 months — 56.0
High — 60.7
Low — 52.4

New Orders

ISM's Non-Manufacturing New Orders Index increased to 53.5 percent in December from the 51.1 percent registered in November. This indicates continued expansion of new orders at a faster rate than in November. Comments from members include: "Additional orders/contracts"; "New business and more from existing customers"; and "Increase in marketing and new projects funded by companies."

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


New Orders
%
Higher
%
Same
%
Lower

Index
December 2007 25 50 25 53.5
November 2007 20 63 17 51.1
October 2007 27 54 19 55.7
September 2007 22 59 19 53.4

Employment

Employment activity in the non-manufacturing sector increased in December, at a faster rate when compared to November. ISM's Non-Manufacturing Employment Index for December is 52.1 percent, a 1.3 percentage point increase from the 50.8 percent reported in November. Six industries reported increased employment, seven reported a decrease, and four indicated employment is unchanged from November. Comments from respondents include: "Increased scope of operations"; "New job awards"; and "Additional staff for new store."

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


Employment
%
Higher
%
Same
%
Lower

Index
December 2007 16 71 13 52.1
November 2007 17 68 15 50.8
October 2007 17 66 17 51.8
September 2007 18 66 16 52.7

Supplier Deliveries

Supplier deliveries slowed in December with the index registering 52.5 percent. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in December are: Other Services*; Utilities; Transportation & Warehousing; Health Care & Social Assistance; Retail Trade; Information; Educational Services; and Finance & Insurance. The industries reporting faster supplier deliveries in December are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation: Wholesale Trade; and Public Administration.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
December 2007 13 79 8 52.5
November 2007 10 83 7 51.5
October 2007 9 82 9 50.0
September 2007 7 87 6 50.5

Inventories

ISM's Non-Manufacturing Inventories Index remained the same in December registering 50.5 percent, indicating that inventory levels increased for the second consecutive month in December after contracting during the month of October. Of the total respondents in December, 29 percent indicated they do not have inventories or do not measure them. Comments from members include: "Not replacing inventory as fast as previously" and "Levels have been increased to support new store."

The industries reporting increases in inventories in December are: Professional, Scientific & Technical Services; Information; Retail Trade; Utilities; and Construction. The industries reporting decreases in inventories in December are: Arts, Entertainment & Recreation; Public Administration; Finance & Insurance; Management of Companies & Support Services; Health Care & Social Assistance; Real Estate, Rental & Leasing; and Wholesale Trade.


Inventories
%
Higher
%
Same
%
Lower

Index
December 2007 26 49 25 50.5
November 2007 22 57 21 50.5
October 2007 18 63 19 49.5
September 2007 18 64 18 50.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in December for the 55th consecutive month. ISM's Non-Manufacturing Prices Index for December registered 72.7 percent, 3.8 percentage points lower than November's index of 76.5 percent. In December, the percentage of respondents reporting higher prices is 37 percent. The percentage indicating no change in prices paid increased 10 percentage points to 61 percent. The percentage of respondents noting lower prices decreased 1 percentage point to 2 percent.

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


Prices
%
Higher
%
Same
%
Lower

Index
December 2007 37 61 2 72.7
November 2007 46 51 3 76.5
October 2007 30 67 3 63.5
September 2007 30 68 2 66.1

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in December for the fourth consecutive month, registering 49 percent, 0.5 percentage point higher than the 48.5 percent reported in November. Of the total respondents in December, 39 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in December are: Construction; Information; Real Estate, Rental & Leasing; Health Care & Social Assistance; and Retail Trade. The industries reporting lower backlog of orders in December are: Other Services*; Management of Companies & Support Services; Educational Services; Transportation & Warehousing; Public Administration; Professional, Scientific & Technical Services; Finance & Insurance; and Wholesale Trade.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
December 2007 20 58 22 49.0
November 2007 17 63 20 48.5
October 2007 4 79 17 43.5
September 2007 13 68 19 47.0

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 remained unchanged for the month of December. The New Export Orders Index for December registered 50 percent, compared to November's index of 55.5 percent. Of the total respondents in December, 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 December are: Information; Arts, Entertainment & Recreation; Finance & Insurance; Professional, Scientific & Technical Services; and Retail Trade. The five industries reporting a decrease in export orders are: Other Services*; Transportation & Warehousing; Public Administration; Agriculture, Forestry, Fishing & Hunting; and Wholesale Trade.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
December 2007 22 56 22 50.0
November 2007 26 59 15 55.5
October 2007 26 60 14 56.0
September 2007 17 66 17 50.0

Imports

The ISM Non-Manufacturing Imports Index increased in December after one month of contraction in November. The index registered 50.5 percent, 1 percentage point higher than November's index of 49.5 percent. In December, 64 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The two industries reporting an increase in the use of imports in December are: Information and Management of Companies & Support Services. The industries reporting a decrease in imports for the month of December are: Public Administration; Arts, Entertainment & Recreation; and Agriculture, Forestry, Fishing & Hunting.


Imports
%
Higher
%
Same
%
Lower

Index
December 2007 14 73 13 50.5
November 2007 17 65 18 49.5
October 2007 23 65 12 55.5
September 2007 12 78 10 51.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in December registered 64.5 percent, 3 percentage points higher than the 61.5 percent reported in November. This indicates that more non-manufacturing purchasing and supply executives feel discomfort with current levels of inventory in December than in November. In December, 32 percent of respondents felt their inventories were too high, 3 percent indicated their inventories were too low, and 65 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in December are: Other Services*; Wholesale Trade; Construction; Real Estate, Rental & Leasing; Transportation & Warehousing; Information; Finance & Insurance; Professional, Scientific & Technical Services; Management of Companies & Support Services; Public Administration; and Retail Trade. The one industry reporting that their inventories are too low is Arts, Entertainment & Recreation.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
December 2007 32 65 3 64.5
November 2007 28 67 5 61.5
October 2007 26 68 6 60.0
September 2007 27 70 3 62.0

*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 January 2008 data will be released at 10:00 a.m. (ET) on Tuesday, February 5, 2008.


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