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Wednesday, August 20, 2014

Non-Manufacturing Business Reaches Milestone in Growth

ISM LogoThe U.S. non-manufacturing sector posted its 44th consecutive month of higher economic activity in August, reports the Institute for Supply Management (ISM). The organization’s Non-Manufacturing Index (NMI) jumped 2.6 percentage points from July to 58.6 percent, the highest monthly level since its inception in January 2008.

ISM’s Non-Manufacturing Business Activity Index also increased in August, to 62.2 percent, 1.8 percentage points more than in July, marking 49 consecutive months of growth.

Both numbers show that the non-manufacturing business sector is outpacing the manufacturing sector. While the Purchasing Manufacturers’ Index (PMI) reached its highest level of the year in August, and posted its 51st consecutive monthly increase, the PMI, at 55.7 percent, is still at least 5 percent below the NMI figure.

ISM bases its August numbers on 16 non-manufacturing industries, most of which are service related. Two of the 16 industries—mining and arts, entertainment and recreation — reported downturns.

Nevertheless, the non-manufacturing numbers were mostly positive, along with ISM’s assessments of them. New orders were up 2.8 percentage points (which the organization terms as growing) from July to 60.5 percent; inventories rose 2.5 points (growing) to 56 percent; and order backlogs increased 4 points (growing) to 50.5 percent.

Employment, importantly, gained 3.8 points to 57 percent, its 13th consecutive month of growth, ISM says.

Although supplier deliveries rose 2 points to 54.5 percent, ISM sees this rate slowing. Prices dropped 6.7 points in August to 53.4 percent, which ISM says reflects a significantly slower rate of increases than in July. Commodity prices that rose in August included such staples as fuel, diesel fuel and labor, while helium and truck parts were reported to be in short supply. Only natural gas dropped in price.

Export orders, rising 1 point to 50.5 percent, are on an upward trend, along with imports, which increased 4.5 points last month to 55 percent.

Select comments from survey respondents, meanwhile, are generally positive about the outlook for business.

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