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October 2010 Non-Manufacturing ISM Report On Business®

FOR RELEASE: November 3, 2010


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


NMI at 54.3%

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 October 2010.


Business Activity Index at 58.4%
New Orders Index at 56.7%
Employment Index at 50.9%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in October for the 10th consecutive month, 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 Worldwide. "The NMI (Non-Manufacturing Index) registered 54.3 percent in October, 1.1 percentage points higher than the 53.2 percent registered in September, and indicating continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index increased 5.6 percentage points to 58.4 percent, reflecting growth for the 11th consecutive month at a substantially faster rate than in September. The New Orders Index increased 1.8 percentage points to 56.7 percent, and the Employment Index increased 0.7 percentage point to 50.9 percent, indicating growth in employment for the second consecutive month and the fourth time in the last six months. The Prices Index increased 8.2 percentage points to 68.3 percent, indicating that prices increased significantly faster in October. According to the NMI, 11 non-manufacturing industries reported growth in October. Respondents' comments remain mixed about business conditions and vary by industry and company. The trend of the overall comments indicates that there are signs of economic stabilization."

INDUSTRY PERFORMANCE (Based on the NMI)

The 11 industries reporting growth in October based on the NMI composite index — listed in order — are: Educational Services; Mining; Professional, Scientific & Technical Services; Information; Finance & Insurance; Wholesale Trade; Health Care & Social Assistance; Accommodation & Food Services; Management of Companies & Support Services; Retail Trade; and Public Administration. The three industries reporting contraction in October are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; and Construction.

WHAT RESPONDENTS ARE SAYING ...
  • "Sales are still down compared to last year, but showing a slight increase." (Public Administration)
  • "Economy still slow for our industry, with very small signs of recovery. Strong downward pricing pressures from customers affecting business." (Professional, Scientific & Technical Services)
  • "Some positive growth in comp [comparable] sales over the past 2 to 3 months." (Accommodation & Food Services)
  • "Business is picking up ever so slowly, but improving." (Transportation & Warehousing)
  • "Generally stable-to-improving demand for our products." (Wholesale Trade)
ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
OCTOBER 2010
  Non-Manufacturing Manufacturing
Index Series
Index
Oct.
Series
Index
Sept.
Percent
Point
Change
Direction Rate
of
Change
Trend**
(Months)
Series
Index
Oct.
Series
Index
Sept.
Percent
Point
Change
NMI/PMI 54.3 53.2 +1.1 Growing Faster 10 56.9 54.4 +2.5
Business Activity/Production 58.4 52.8 +5.6 Growing Faster 11 62.7 56.5 +6.2
New Orders 56.7 54.9 +1.8 Growing Faster 14 58.9 51.1 +7.8
Employment 50.9 50.2 +0.7 Growing Faster 2 57.7 56.5 +1.2
Supplier Deliveries 51.0 55.0 -4.0 Slowing Slower 7 51.2 52.3 -1.1
Inventories 47.5 47.0 +0.5 Contracting Slower 2 53.9 55.6 -1.7
Prices 68.3 60.1 +8.2 Increasing Faster 15 71.0 70.5 +0.5
Backlog of Orders 52.0 48.0 +4.0 Growing From Contracting 1 46.0 46.5 -0.5
New Export Orders 55.5 58.0 -2.5 Growing Slower 2 60.5 54.5 +6.0
Imports 54.0 53.0 +1.0 Growing Faster 3 51.5 56.5 -5.0
Inventory Sentiment 61.5 59.5 +2.0 Too High Faster 161 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 44.0 42.5 +1.5

* 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

Airline Tickets; Beef; Cable and Cable Products; Coated Freesheet; Computer Accessories; Copper (2); Cotton Products (2); Dairy; #1 Diesel Fuel; #2 Diesel Fuel (4); Fuel (10); Gasoline; Lumber Products; Pork; and Rebar.

Commodities Down in Price

Consulting Services; and Shingles.

Commodities in Short Supply

Coated Groundwood (4); and Telephone Components.

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



OCTOBER 2010 NON-MANUFACTURING INDEX SUMMARIES


NMI (Non-Manufacturing Index)

In October, the NMI registered 54.3 percent, indicating continued growth in the non-manufacturing sector for the 10th consecutive month. 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.

NMI HISTORY
Month NMI Month NMI
Oct 2010 54.3 Apr 2010 55.4
Sep 2010 53.2 Mar 2010 55.4
Aug 2010 51.5 Feb 2010 53.0
Jul 2010 54.3 Jan 2010 50.5
Jun 2010 53.8 Dec 2009 49.8
May 2010 55.4 Nov 2009 48.4
Average for 12 months — 52.9
High — 55.4
Low — 48.4

Business Activity

ISM's Non-Manufacturing Business Activity Index in October registered 58.4 percent, an increase of 5.6 percentage points when compared to the 52.8 percent registered in September. Ten industries reported increased business activity, and three industries reported decreased activity for the month of October. Five industries reported no change from September. Comments from respondents include: "Continued strength in core businesses and capital expenditures for balance of 2010" and "Increase in service calls/requests for service."

The industries reporting growth of business activity in October — listed in order — are: Finance & Insurance; Educational Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; Accommodation & Food Services; Other Services; Wholesale Trade; Information; Public Administration; and Retail Trade. The industries reporting decreased business activity in October are: Agriculture, Forestry, Fishing & Hunting; Construction; and Mining.


Business Activity
%
Higher
%
Same
%
Lower

Index
Oct 2010 30 57 13 58.4
Sep 2010 25 56 19 52.8
Aug 2010 27 53 20 54.4
Jul 2010 27 57 16 57.4

New Orders

ISM's Non-Manufacturing New Orders Index grew in October for the 14th consecutive month. The index registered 56.7 percent, which is an increase of 1.8 percentage points from the 54.9 percent reported in September. Comments from respondents include: "Orders awarded that have been on customer hold" and "New projects approved."

The 10 industries reporting growth of new orders in October — listed in order — are: Professional, Scientific & Technical Services; Mining; Educational Services; Finance & Insurance; Transportation & Warehousing; Accommodation & Food Services; Retail Trade; Information; Wholesale Trade; and Public Administration. The three industries reporting contraction of new orders in October are: Other Services; Construction; and Health Care & Social Assistance.


New Orders
%
Higher
%
Same
%
Lower

Index
Oct 2010 25 63 12 56.7
Sep 2010 23 62 15 54.9
Aug 2010 22 61 17 52.4
Jul 2010 29 54 17 56.7

Employment

Employment activity in the non-manufacturing sector grew in October, as ISM's Non-Manufacturing Employment Index registered 50.9 percent. This reflects an increase of 0.7 percentage point when compared to the 50.2 percent registered in September. Seven industries reported increased employment, eight industries reported decreased employment, and three industries reported unchanged employment compared to September. Comments from respondents include: "Continue moderate hire increases of hourly workers per business increases" and "Slight lessening of hiring restrictions due to improved economic climate."

The industries reporting an increase in employment in October — listed in order — are: Mining; Information; Management of Companies & Support Services; Health Care & Social Assistance; Retail Trade; Educational Services; and Public Administration. The industries reporting a reduction in employment in October — listed in order — are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Accommodation & Food Services; Transportation & Warehousing; Construction; Wholesale Trade; and Professional, Scientific & Technical Services.


Employment
%
Higher
%
Same
%
Lower

Index
Oct 2010 13 69 18 50.9
Sep 2010 15 68 17 50.2
Aug 2010 13 69 18 48.2
Jul 2010 17 73 10 50.9

Supplier Deliveries

The Supplier Deliveries Index registered 51 percent in October, 4 percentage points lower than the 55 percent registered in September, indicating that supplier deliveries continued to slow in October. A reading above 50 percent indicates slower deliveries.

The seven industries reporting slower deliveries in October — listed in order — are: Construction; Wholesale Trade; Educational Services; Accommodation & Food Services; Retail Trade; Information; and Professional, Scientific & Technical Services. The three industries reporting faster supplier deliveries in October are: Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; and Public Administration.


Supplier Deliveries
%
Slower
%
Same
%
Faster

Index
Oct 2010 8 86 6 51.0
Sep 2010 13 84 3 55.0
Aug 2010 11 80 9 51.0
Jul 2010 9 86 5 52.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 47.5 percent in October, indicating that inventory levels contracted in October for the second consecutive month. Of the total respondents in October, 32 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Continuing to manage down inventories" and "Better materials management processes."

The seven industries reporting an increase in inventories in October — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Other Services; Wholesale Trade; Retail Trade; Public Administration; Professional, Scientific & Technical Services; and Accommodation & Food Services. The seven industries reporting decreases in inventories in October — listed in order — are: Arts, Entertainment & Recreation; Construction; Information; Management of Companies & Support Services; Transportation & Warehousing; Health Care & Social Assistance; and Finance & Insurance.


Inventories
%
Higher
%
Same
%
Lower

Index
Oct 2010 16 63 21 47.5
Sep 2010 14 66 20 47.0
Aug 2010 19 69 12 53.5
Jul 2010 27 57 16 55.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in October at a significantly faster rate than in September. ISM's Non-Manufacturing Prices Index for October registered 68.3 percent, 8.2 percentage points higher than the 60.1 percent reported in September. In October, the percentage of respondents reporting higher prices is 32 percent, the percentage indicating no change in prices paid is 65 percent, and 3 percent of the respondents reported lower prices.

In October, 13 industries reported an increase in prices paid, in the following order: Wholesale Trade; Arts, Entertainment & Recreation; Accommodation & Food Services; Information; Mining; Construction; Educational Services; Utilities; Transportation & Warehousing; Finance & Insurance; Public Administration; Retail Trade; and Professional, Scientific & Technical Services. No industry reported prices as decreasing for the month of October. Five industries reported no change in prices for the month of October.


Prices
%
Higher
%
Same
%
Lower

Index
Oct 2010 32 65 3 68.3
Sep 2010 22 70 8 60.1
Aug 2010 19 77 4 60.3
Jul 2010 21 71 8 52.7

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew in October after one month of contraction. The index registered 52 percent, 4 percentage points higher than the 48 percent reported in September. Of the total respondents in October, 40 percent indicated they do not measure backlog of orders.

The seven industries reporting an increase in order backlogs in October — listed in order — are: Real Estate, Rental & Leasing; Mining; Utilities; Retail Trade; Accommodation & Food Services; Wholesale Trade; and Public Administration. The three industries reporting lower backlog of orders in October are: Agriculture, Forestry, Fishing & Hunting; Construction; and Health Care & Social Assistance.


Backlog of Orders
%
Higher
%
Same
%
Lower

Index
Oct 2010 16 72 12 52.0
Sep 2010 15 66 19 48.0
Aug 2010 18 65 17 50.5
Jul 2010 13 78 9 52.0

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 grew at a slower rate in October. The New Export Orders Index for October registered 55.5 percent, which is 2.5 percentage points lower than the 58 percent registered in September. Of the total respondents in October, 67 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The five industries reporting an increase in new export orders in October are: Construction; Retail Trade; Transportation & Warehousing; Accommodation & Food Services; and Professional, Scientific & Technical Services. The two industries reporting a decrease in export orders in October are: Mining and Other Services. Eight industries reported no change in new export orders for the month of October.


New Export Orders
%
Higher
%
Same
%
Lower

Index
Oct 2010 25 61 14 55.5
Sep 2010 23 70 7 58.0
Aug 2010 10 73 17 46.5
Jul 2010 15 74 11 52.0

Imports

The ISM Non-Manufacturing Imports Index grew in October for the third consecutive month. The index registered 54 percent, which is 1 percentage point higher than the 53 percent reported in September. In October, 59 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The six industries reporting an increase in the use of imports in October — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Construction; Other Services; Retail Trade; Accommodation & Food Services; and Wholesale Trade. The only industry reporting a decrease in imports for the month of October is Arts, Entertainment & Recreation. Ten industries reported no change in imports for the month of October.


Imports
%
Higher
%
Same
%
Lower

Index
Oct 2010 15 78 7 54.0
Sep 2010 14 78 8 53.0
Aug 2010 10 81 9 50.5
Jul 2010 8 80 12 48.0

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in October registered 61.5 percent, which is 2 percentage points higher than the 59.5 percent reported in September. This indicates that respondents believe their inventories are too high at this time. In October, 28 percent of respondents said their inventories were too high, 5 percent said their inventories were too low, and 67 percent said their inventories were about right.

The nine industries reporting a feeling that their inventories are too high in October — listed in order — are: Transportation & Warehousing; Real Estate, Rental & Leasing; Other Services; Professional, Scientific & Technical Services; Wholesale Trade; Retail Trade; Finance & Insurance; Accommodation & Food Services; and Health Care & Social Assistance. The two industries reporting that their inventories are too low in October are: Management of Companies & Support Services; and Construction.


Inventory Sentiment
%Too
High
%About
Right
%Too
Low

Index
Oct 2010 28 67 5 61.5
Sep 2010 27 65 8 59.5
Aug 2010 27 66 7 60.0
Jul 2010 27 64 9 59.0

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; Public Administration; and Other Services (services such as 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).

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, and the diffusion index. 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 November 2010 data will be released at 10:00 a.m. (ET) on Friday, December 3, 2010.



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