March 2008 Non-Manufacturing ISM Report On Business®

FOR RELEASE: April 3, 2008


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


NMI (Non-Manufacturing Index) at 49.6%

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 2008.


Business Activity Index at 52.2%
New Orders Index at 50.2%
Employment Index at 46.9%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector contracted in March, 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. "The NMI (Non-Manufacturing Index) increased 0.3 percentage point to 49.6 percent, indicating contraction for the third consecutive month within the non-manufacturing sector for March 2008. Non-manufacturing business activity increased for the second consecutive month. The New Orders Index increased 0.6 percentage point to 50.2 percent, and the Employment Index contracted for the third consecutive month, remaining at 46.9 percent. The Prices Index increased to 70.8 percent in March, indicating a faster rate in price increases than in February. According to the NMI, 11 non-manufacturing industries reported growth in March. Members' comments in March are mixed and reflect concern about rising fuel and energy costs and the impact they are having on commodity prices."

INDUSTRY PERFORMANCE (Based on the NMI)

The 11 industries reporting growth in March based on the new NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Mining; Agriculture, Forestry, Fishing & Hunting; Construction; Information; Other Services*; Utilities; Retail Trade; Accommodation & Food Services; Health Care & Social Assistance; and Public Administration. The six industries reporting contraction in March are: Transportation & Warehousing; Wholesale Trade; Educational Services; Finance & Insurance; Management of Companies & Support Services; and Professional, Scientific & Technical Services.

WHAT RESPONDENTS ARE SAYING ...
  • "Business has increased due in part to us reducing unit prices on all products. Sales traffic has increased and foreign buyers have made up the majority of the increased traffic." (Construction)
  • "Continued stress in the financial markets across a broad base of factors continues to have impacts on overall business activity." (Finance & Insurance)
  • "Outrageous, speculative oil prices are driving up petroleum-based products as well as delivery costs." (Professional, Scientific & Technical Services)
  • "Although business levels are higher this month, the current trend is not as active for spending." (Accommodation & Food Services)
  • "Activity levels ahead of plan, but reimbursement and overall revenues only tracking to plan. Continued concerns regarding erosion of returns on investment which are used to fund capital projects, pension plans, etc." (Health Care & Social Assistance)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
MARCH 2008
  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
NMI/PMI 49.6 49.3 +0.3 Contracting Slower 3 48.6 48.3 +0.3
Business Activity/Production 52.2 50.8 +1.4 Growing Faster 2 48.7 50.7 -2.0
New Orders 50.2 49.6 +0.6 Growing From Contracting 1 46.5 49.1 -2.6
Employment 46.9 46.9 0.0 Contracting Same 3 49.2 46.0 +3.2
Supplier Deliveries 49.0 50.0 -1.0 Faster From Unchanged 1 53.6 50.1 +3.5
Inventories 51.5 50.0 +1.5 Growing From Unchanged 1 44.9 45.4 -0.5
Prices 70.8 67.9 +2.9 Increasing Faster 58 83.5 75.5 +8.0
Backlog of Orders 47.5 49.5 -2.0 Contracting Faster 7 47.5 45.0 +2.5
New Export Orders 55.0 46.5 +8.5 Growing From Contracting 1 56.5 56.0 +0.5
Imports 54.5 49.0 +5.5 Growing From Contracting 1 45.0 47.5 -2.5
Inventory Sentiment 60.5 60.5 0.0 "Too High" Same 130 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 51.0 49.0 +2.0

* 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

A/C Parts; Air Freight; Airline Tickets; All Fuel; All Oil Based Products; Aluminum; Aluminum Products; Auto Fuel; Automotive; Bakery Items; Beef; Bread; Carbon Steel Pipe; Construction Labor; Copier Paper (2); Copper Products; Copper Wire; Corrugated (2); Cut Paper; Diesel Fuel (6); #1 Diesel Fuel; #2 Diesel Fuel (6); Eggs; Energy; Freight Charges; Fuel (14); Fuel Products; Fuel Surcharges (3); Gasoline* (7); #2 Heating Fuel; Lighting Supplies; Nickel Products; Office Paper; Office Supplies (2); Oil; Paper (5); Paper Products; Pasta; Petroleum; Petroleum Products; Pipe; Plastic Bags; Plastic Products (2); Plumbing Products; Resin; Shipping Costs; Silver; Stainless Steel Products (2); Stainless Steel Sheet; Steel; Steel Plate; Steel Products (3); Steel Sheet; Textile Products; Toilet Paper; Toner; Trash Can Liners; and Wood Products.

Commodities Down in Price

Gasoline* (2) is the only commodity reported down in price.

Commodities in Short Supply

Coated Ground Wood (2) and Steel.

Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.



MARCH 2008 NON-MANUFACTURING INDEX SUMMARIES



NMI (Non-Manufacturing Index)

Beginning with the January 2008 Non-Manufacturing Report On Business®, a composite index is now calculated as an indicator of the overall economic condition for the non-manufacturing sector. The NMI is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. March's NMI at 49.6 percent indicates a contraction in the non-manufacturing sector. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.

The industries reporting growth in March are: Real Estate, Rental & Leasing; Mining; Agriculture, Forestry, Fishing & Hunting; Construction; Information; Other Services*; Utilities; Retail Trade; Accommodation & Food Services; Health Care & Social Assistance; and Public Administration. The industries reporting contraction in March are: Transportation & Warehousing; Wholesale Trade; Educational Services; Finance & Insurance; Management of Companies & Support Services; and Professional, Scientific & Technical Services.

NMI HISTORY
Month NMI
March 2008 49.6
February 2008 49.3
January 2008 44.6

Business Activity

ISM's Non-Manufacturing Business Activity Index in March registered 52.2 percent, indicating an increase of 1.4 percentage points when compared to the 50.8 percent registered in February. Eleven industries reported increased business activity, and five industries reported decreased activity for the month of March. Two industries reported no change from February. Comments from respondents include: "Starting new projects"; "Customers releasing projects as well as successful bids on some new projects"; "Increased demand on existing projects"; and "Utility construction activity continues at a steady pace."

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


Business Activity
%
Higher
%
Same
%
Lower

Index
March 2008 30 50 20 52.2
February 2008 26 47 27 50.8
January 2008 18 40 42 41.9
December 2007 24 54 22 54.4


THE LAST 12 MONTHS
Month Business
Activity Index
  Month Business
Activity Index
Mar 2008 52.2   Sep 2007 55.7
Feb 2008 50.8   Aug 2007 56.3
Jan 2008 41.9   Jul 2007 55.9
Dec 2007 54.4   Jun 2007 59.7
Nov 2007 54.6   May 2007 58.4
Oct 2007 55.5   Apr 2007 56.0
Average for 12 months — 54.3
High — 59.7
Low — 41.9

New Orders

ISM's Non-Manufacturing New Orders Index grew in March after two consecutive months of contraction. The index increased 0.6 percentage point to 50.2 percent from the 49.6 percent registered in February. Comments from respondents include: "New customers, seasonal increase"; "Increased admissions and lengths of stay"; and "Seeing increased orders for later this year."

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


New Orders
%
Higher
%
Same
%
Lower

Index
March 2008 25 52 23 50.2
February 2008 24 50 26 49.6
January 2008 18 46 36 43.5
December 2007 25 50 25 53.9

Employment

Employment activity in the non-manufacturing sector contracted in March for the third consecutive month. ISM's Non-Manufacturing Employment Index for March registered the same as February at 46.9 percent. Five industries reported increased employment, six industries reported a decrease, and seven industries indicated employment is unchanged from February. Comments from respondents include: "Layoffs for general cost cutting"; "Hiring freeze due to budget constraints"; and "We have a few less employees and are not hiring presently."

The industries reporting growth in employment in March are: Real Estate, Rental & Leasing; Accommodation & Food Services; Construction; Educational Services; and Professional, Scientific & Technical Services. The industries reporting a reduction in employment in March are: Other Services*; Finance & Insurance; Wholesale Trade; Public Administration; Information; and Retail Trade.


Employment
%
Higher
%
Same
%
Lower

Index
March 2008 14 66 20 46.9
February 2008 14 63 23 46.9
January 2008 6 70 24 43.9
December 2007 16 71 13 51.8

Supplier Deliveries

Supplier deliveries were faster in March with the index registering 49 percent. A reading above 50 percent indicates slower deliveries.

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


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
March 2008 7 84 9 49.0
February 2008 7 86 7 50.0
January 2008 8 82 10 49.0
December 2007 13 79 8 52.5

Inventories

ISM's Non-Manufacturing Inventories Index registered 51.5 percent in March, indicating that inventory levels grew in March when compared to February. Of the total respondents in March, 27 percent indicated they do not have inventories or do not measure them. Comments from members include: "Stock piling paper inventory to minimize effect of future price increase"; "Lowering inventories to save cash"; and "Phase in of new machines to replace older ones — in inventory until deployment schedule is completed."

The industries reporting increases in inventories in March are: Real Estate, Rental & Leasing; Information; Management of Companies & Support Services; Other Services*; Transportation & Warehousing; Professional, Scientific & Technical Services; Public Administration; and Retail Trade. The industries reporting decreases in inventories in March are: Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Accommodation & Food Services; and Health Care & Social Assistance.


Inventories
%
Higher
%
Same
%
Lower

Index
March 2008 22 59 19 51.5
February 2008 24 52 24 50.0
January 2008 14 61 25 44.5
December 2007 26 49 25 50.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in March for the 58th consecutive month. ISM's Non-Manufacturing Prices Index for March registered 70.8 percent, 2.9 percentage points higher than February's index of 67.9 percent. In March, the percentage of respondents reporting higher prices is 53 percent. The percentage indicating no change in prices paid is 45 percent. The percentage of respondents noting lower prices is at 2 percent.

In March, 17 out of 18 industries reported an increase in prices paid in the following order: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Accommodation & Food Services; Construction; Utilities; Management of Companies & Support Services; Educational Services; Public Administration; Mining; Professional, Scientific & Technical Services; Other Services*; Retail Trade; Finance & Insurance; Information; Transportation & Warehousing; Wholesale Trade; and Health Care & Social Assistance. One industry, Agriculture, Forestry, Fishing & Hunting, reported prices unchanged in March.


Prices
%
Higher
%
Same
%
Lower

Index
March 2008 53 45 2 70.8
February 2008 41 54 5 67.9
January 2008 41 54 5 70.7
December 2007 37 61 2 71.5

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in March for the seventh consecutive month, registering 47.5 percent, 2 percentage points lower than the 49.5 percent reported in February. Of the total respondents in March, 41 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in March are: Construction; Other Services*; Retail Trade; and Public Administration. The industries reporting lower backlog of orders in March are: Management of Companies & Support Services; Educational Services; Information; Utilities; Accommodation & Food Services; Transportation & Warehousing; Finance & Insurance; Professional, Scientific & Technical Services; and Wholesale Trade.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
March 2008 14 67 19 47.5
February 2008 23 53 24 49.5
January 2008 13 66 21 46.0
December 2007 20 58 22 49.0

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 indicated growth for the month of March. The New Export Orders Index for March registered 55 percent, compared to February's index of 46.5 percent. Of the total respondents in March, 69 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: Information; Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Mining; Other Services*; and Retail Trade. The industries reporting a decrease in export orders in March are: Management of Companies & Support Services; Transportation & Warehousing; Accommodation & Food Services; and Finance & Insurance.

New
Export Orders
%
Higher
%
Same
%
Lower

Index
March 2008 26 58 16 55.0
February 2008 16 61 23 46.5
January 2008 21 62 17 52.0
December 2007 22 56 22 50.0

Imports

The ISM Non-Manufacturing Imports Index registered 54.5 percent in March after two consecutive months of contraction. The index is 5.5 percentage points higher than February's index of 49 percent. In March, 60 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: Information; Arts, Entertainment & Recreation; Utilities; Other Services*; Retail Trade; and Health Care & Social Assistance. The industries reporting a decrease in imports for the month of March are: Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; and Wholesale Trade.


Imports
%
Higher
%
Same
%
Lower

Index
March 2008 20 69 11 54.5
February 2008 18 62 20 49.0
January 2008 10 63 27 41.5
December 2007 14 73 13 50.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index remained unchanged in March at 60.5 percent. This indicates that non-manufacturing purchasing and supply executives feel the same level of discomfort with the levels of inventory in both March and February. In March, 24 percent of respondents felt their inventories were too high, 3 percent indicated their inventories were too low, and 73 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in March are: Other Services*; Transportation & Warehousing; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Information; Wholesale Trade; Health Care & Social Assistance; and Retail Trade. The industries reporting that their inventories are too low are: Construction and Public Administration.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
March 2008 24 73 3 60.5
February 2008 29 63 8 60.5
January 2008 23 68 9 57.0
December 2007 32 65 3 64.5

*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. All seasonal adjustment factors are supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The remaining indexes have not indicated significant seasonality.

The NMI is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. 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 2008 data will be released at 10:00 a.m. (ET) on Monday, May 5, 2008.


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