--- To enhance the value and performance of procurement and SCM practitioners and their organizations worldwide ---



May 2002 Non-Manufacturing ISM Report On Business®

FOR RELEASE: June 5, 2002

Contact: Kristen Kioa
  ISM, Media Relations
  Tempe, Arizona
  (800) 888-6276, Ext. 3015
Business Activity at 60.1%

DO NOT CONFUSE THIS NATIONAL NON-MANUFACTURING REPORT with the various regional purchasing and supply reports released across the country or the Manufacturing ISM Report On Business®. The national non-manufacturing report's information reflects the entire United States, while the regional reports cover only their local vicinity. 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 May 2002.

New Orders, Order Backlogs, Prices, Exports, Imports Increase
Employment, Inventories Decrease

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased in May 2002, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.

The report was issued today by Ralph G. Kauffman, Ph.D., C.P.M., chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee and coordinator of the purchasing and supply management program, University of Houston-Downtown. "In May, non-manufacturing business activity increased at the strongest rate since August 2000. This follows slower rates of growth in March and April," Kauffman said. He added, "This month's 60.1 percent Business Activity Index indicates the fourth consecutive month of significant growth in non-manufacturing business activity. Also in May, the Backlog of Orders Index moved above 50 percent, indicating the first growth in order backlogs since December 2000 and the highest Index since October 2000."

Reports from purchasing and supply executives indicate 13 industry groups grew in May and two groups contracted, with one group indicating no change. Increased business activity in May was reported by 34 percent of members, compared to April's 31 percent. Reduced activity was reported by 11 percent of members compared to 13 percent in April. In May, the remaining 55 percent of members indicated no change in business activity compared to 56 percent in April.

Also this month, inventories, after rising in April, decreased in May. New Export Orders and Imports continued to increase in May, while Employment shrank for the 15th consecutive month. The Inventory Sentiment Index increased, indicating greater discomfort with current inventory levels. Supplier Deliveries indicated slower performance for the ninth month.

"Overall in May, non-manufacturing industries reported stronger growth in business activity, at a faster rate than in April. In addition, New Orders grew at a slightly higher rate than in April. Order backlogs increased for the first time in 17 months, export and import activity increased, and inventories decreased. Employment continued to decrease (but more slowly than in April), and prices increased at a slower rate than in April," Kauffman commented.

Significant reports of commodities in short supply or up or down in price in May indicate none are in short supply. Price increases are reported for auto fuel; beef; cheese; copper and copper products; diesel fuel; drywall; energy; freight; fuel; gasoline; lumber; memory; paper; petroleum-based products; petroleum products; plastic resins; PVC pipe and fittings; roofing shingles; and steel and steel products. Price decreases are reported for corrugated; light bulbs; office supplies; paper products; PCs; and produce.

ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE and
COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS*
  Non-Manufacturing Manufacturing
Index May
Index %
April
Index %
Index
Change
from April
Direction
& Rate of
Change
May
Index %
April
Index %
Index
Change
from April
Business Activity/ Production 60.1 55.3 +4.8 Increasing faster 58.5 58.0 +0.5
New Orders 56.8 56.4 +0.4 Increasing faster 63.1 59.0 +4.1
Employment 49.5 48.9 +0.6 Decreasing Slower 47.3 46.7 +0.6
Supplier Deliveries 52.0 51.5 +0.5 Slowing faster 53.9 53.7 +0.2
Inventories 48.5 52.5 -4.0 Decreasing from Increasing 45.6 42.9 +2.7
Prices 55.5 59.5 -4.0 Increasing slower 63.0 60.3 +2.7
Backlog of Orders 53.5 48.5 +5.0 Increasing from Decreasing 56.5 56.0 +0.5
New Export Orders 61.5 52.5 +9.0 Increasing faster 53.3 51.9 +1.4
Imports 54.0 56.2 -2.2 Increasing slower 53.6 55.7 -2.1
Inventory Sentiment 65.0 63.0 +2.0 Increased Feeling of "too high" N/A    
Customer Inventories N/A       39.0 40.5 -1.5

* Non-Manufacturing ISM Report On Business® data is seasonally adjusted for Business Activity, New Orders, Imports, and Employment. Manufacturing ISM Report On Business® data is seasonally adjusted except for Backlog of Orders and Customer Inventories.

Business Activity

ISM's Non-Manufacturing Business Activity Index in May rose 4.8 percentage points on a seasonally adjusted basis to 60.1 percent from April's 55.3 percent. May's Index is the highest Business Activity measure since 60.8 percent was recorded in August 2000. In May, 13 sectors reported increased business activity, two sectors reported decreased activity, and one was unchanged, compared to April. The percent of members reporting increased activity in May was 34 percent, an increase of 3 percentage points from April's 31 percent. Decreased activity was reported by 11 percent of members in May, compared to 13 percent in April. Those reporting no change in activity in May totaled 55 percent, compared to 56 percent in April.

The industries reporting the highest rates of growth of business activity in May are: Agriculture; Business Services; Transportation; Wholesale Trade; and Other Services*. The industries reporting contraction of business activity in May are: Health Services and Construction.

Business
Activity
% Higher % Same % Lower Index
May 2002 34 55 11 60.1
April 2002 31 56 13 55.3
March 2002 32 57 11 57.3
February 2002 31 53 16 58.7

New Orders

ISM's Non-Manufacturing New Orders Index increased slightly to 56.8 percent in May from 56.4 percent in April. Except for the 57.3 percent Index in February 2002, April's New Orders Index was the highest since November 2000 (57.9 percent). Comments from members included: "New contracts and grants"; "Number of remodel and new store construction is rising"; "Increased sales activity"; and "More opportunities to bid work in our area."

The industries reporting the highest rates of growth of new orders in May are: Other Services*; Real Estate; Agriculture; Retail Trade; and Transportation. The industries reporting contraction of new orders in May are: Mining and Health Services.

New
Orders
% Higher % Same % Lower Index
May 2002 32 55 13 56.8
April 2002 33 55 12 56.4
March 2002 28 59 13 54.9
February 2002 30 53 17 57.3

Employment

Employment in the non-manufacturing sector contracted in May for the 15th consecutive month. ISM's Non-Manufacturing Employment Index for May was 49.5 percent compared to 48.9 percent in April. May's Index was the highest since 50.4 percent was reported in February 2001 and indicates a continuing trend of slower rates of decreasing employment. Comments from respondents included: "Increased requirements"; "Retirements without replacement"; "Attrition without replacements"; and "Tightened the belt."

The industries reporting the highest rates of growth in employment in May are: Agriculture; Health Services; Business Services; Insurance; and Real Estate. Industries reporting the highest rates of reduction in employment in May are: Entertainment; Construction; Communication; Utilities; and Mining.

Employment % Higher % Same % Lower Index
May 2002 15 70 15 49.5
April 2002 12 75 13 48.9
March 2002 11 71 18 45.5
February 2002 7 69 24 43.6

Supplier Deliveries

The delivery performance of suppliers to non-manufacturing organizations was slower for the ninth consecutive month in May, registering an index value of 52.0 percent, 0.5 percentage point higher than April's 51.5 percent. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in May included: "JIT program initiated"; "Suppliers are rebuilding inventories"; "Increased activity, some suppliers not prepared"; and "Deliveries delayed for security reasons."

The industries that reported slower supplier deliveries in May are: Wholesale Trade; Business Services; Transportation; Other Services*; Public Administration; and Retail Trade. The only industry that reported faster supplier deliveries in May was Health Services.

Supplier
Deliveries
% Slower % Same % Faster Index
May 2002 6 92 2 52.0
April 2002 6 91 3 51.5
March 2002 6 92 2 52.0
February 2002 9 88 3 53.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 48.5 percent in May, a decrease of 4 percentage points from the 52.5 percent reported in April. May's Index means that material inventories maintained by non-manufacturing organizations decreased in May after three months of either unchanged or increased inventories. Of the total respondents in May, 33 percent indicated they do not have inventories. Comments from members included: "Better inventory management"; "Adjustment to lower level of business activity"; "Working to improve turns"; and "Increased drop ships."

The industries reporting inventory increases in May are: Real Estate; Agriculture; Mining; Communication; and Other Services*. Industries reporting the highest rates of inventory decrease in May are: Insurance; Utilities; Public Administration; Finance and Banking; and Retail Trade.

Inventory
Change
% Higher % Same % Lower Index
May 2002 19 59 22 48.5
April 2002 21 63 16 52.5
March 2002 19 62 19 50.0
February 2002 22 59 19 51.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased for the third month in May after eight months of lower or unchanged prices prior to March 2002. ISM's Non-Manufacturing Prices Index for May was 55.5 percent, a drop of 4 percentage points from April's 59.5 percent. The percentage of members reporting higher prices declined to 20 percent from 26 percent in April, the proportion indicating no change increased 4 percentage points to 71 percent, and the number who noted lower prices increased 2 percentage points to 9 percent.

The industries reporting the highest rates of increase in prices paid in May are: Agriculture; Wholesale Trade; Construction; Real Estate; Insurance; and Transportation. The industries that reported price decreases in May are: Retail Trade; Finance and Banking; and Other Services*.

Prices % Higher % Same % Lower Index
May 2002 20 71 9 55.5
April 2002 26 67 7 59.5
March 2002 16 74 10 53.0
February 2002 16 68 16 50.0

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index registered 53.5 percent in May. This indication of growth in order backlogs follows 16 consecutive months of decline in order backlogs. The May index is an increase of 5 percentage points from April's 48.5 percent. Purchasing and supply executives' comments on backlogs of orders included: "IT projects"; "Increased sales — future sales"; "Not enough distribution storage space"; and "Lower stock at suppliers." Of the total respondents in May, 42 percent indicated they do not measure backlog of orders.

The industries reporting growth of backlog of orders in May are: Transportation; Wholesale Trade; Utilities; Finance and Banking; and Other Services*. The only industry reporting a decline of order backlogs in May is Public Administration.

Backlog
of Orders
% Higher % Same % Lower Index
May 2002 15 77 8 53.5
April 2002 10 77 13 48.5
March 2002 15 69 16 49.5
February 2002 11 73 16 47.5

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 second month in May after a slight dip in March. The New Export Orders Index for May was 61.5 percent compared to April's 52.5 percent. Of the total respondents in May, 76 percent indicated they either do not perform, or do not separately measure, orders for work outside the United States.

The industries reporting increases in new export orders in May are: Insurance; Construction; Communication; Finance and Banking; Mining; Retail Trade; Transportation; Wholesale Trade; and Business Services. The only industry reporting a decrease in new export orders in May is Other Services*.

New Export
Orders
% Higher % Same % Lower Index
May 2002 30 63 7 61.5
April 2002 10 85 5 52.5
March 2002 15 69 16 49.5
February 2002 15 75 10 52.5

Imports

Use of imported materials by non-manufacturing industries increased for the second month in May after a decrease in March. ISM's Non-Manufacturing Imports Index for May was 54 percent, a decrease of 2.2 percentage points from the 56.2 percent reported in April. In May, 73 percent of respondents reported that they do not use or do not track use of imported materials.

The industries reporting an increase in use of imports in May are: Communication; Health Services; Transportation; and Wholesale Trade. The industries reporting decreased use of imports in May are Other Services* and Business Services.

Imports % Higher % Same % Lower Index
May 2002 18 75 7 54.0
April 2002 16 82 2 56.2
March 2002 13 78 9 48.9
February 2002 12 79 9 54.3

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in May registered 65 percent compared to 63 percent for April. This increase indicates that non-manufacturing purchasing and supply executives felt a somewhat greater degree of discomfort with current levels of inventory in May than they did during April. In May, 32 percent of respondents felt their inventories were too high (33 percent in April). Also in May, 2 percent indicated their inventories were too low (7 percent in April), and 66 percent said that their inventories were about right (60 percent in April).

The industries that reported the highest rates of feeling that their inventories were too high in May are: Communication; Construction; Finance and Banking; Mining; and Utilities. No industry reported that its inventories were too low in May.

Inventory
Sentiment
% Too
High
% About
Right
% Too
Low
Index
May 2002 32 66 2 65.0
April 2002 33 60 7 63.0
March 2002 35 61 4 65.5
February 2002 36 61 3 66.5

*Other Services include:
Hotels, Rooming Houses, Camps, and Other Lodging Places; Personal Services; Automotive Repair, Services, and Parking; Miscellaneous Repair Services; Educational Services; Social Services; Museums, Art Galleries, and Botanical and Zoological Gardens; Membership Organizations; Engineering, Accounting, Research, Management, and Related Services; and Miscellaneous Services.

Commodities Reported in Short Supply

No commodities reported in short supply.

Commodities Reported Up in Price

Auto Fuel; Beef; Cheese; Copper and Copper Products — 3rd month; Diesel Fuel — 3rd month; Drywall (Gypsum Board) — 2nd month; Energy; Freight; Fuel — 3rd month; Gasoline — 4th month; Lumber — 4th month; Memory; Paper; Petroleum-Based Products — 2nd month; Petroleum Products; Plastic Resins; PVC Pipe and Fittings — 3rd month; Roofing Shingles; Steel and Steel Products — 4th month.

Commodities Reported Down in Price

Corrugated — 2nd month; Light Bulbs; Office Supplies; Paper Products; PCs; Produce — 2nd month.

Data and Method of Presentation

Non-Manufacturing ISM Report on Business® is based on data compiled from monthly replies to questions asked of more than 370 purchasing and supply executives in over 62 different industries representing nine divisions from the Standard Industrial Classification (SIC) categories. Membership of the Business Survey Committee is diversified by SIC category and is based on each industry's contribution to Gross Domestic Product (GDP).

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, Imports, and Employment. The remaining indexes have not indicated significant seasonality.

A weighted composite index similar to the PMI that is so popular in the Manufacturing ISM Report on Business® is not available. Several years of data will need to be developed before that type of non-manufacturing indicator can be developed. 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, 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 world's leading educator of supply management professionals and is a valuable resource for decision makers in major markets, companies, and government. In May 2001 the membership of NAPM voted to change the association's name from the National Association of Purchasing Management to the Institute for Supply Management™ to reflect the increasing strategic and global significance of supply management. For further information, see the ISM Web site at www.ism.ws.

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 June 2002 data will be released at 10:00 a.m. (ET) on July 3, 2002.



Back to Top





Rate and Review this item

Rate this item:



Log in to rate or review this item.