U.S. non-manufacturing sector grew in March; NMI rises 2.4 points to 55.4

Economic activity in the United States non-manufacturing sector grew in March for the third consecutive month, say the nation's purchasing and supply executives in the Institute for Supply Management's latest Non-Manufacturing ISM Report On Business.

The report was issued April 5 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 55.4 percent in March, 2.4 percentage points higher than the seasonally adjusted 53 percent registered in February, and indicating growth in the non-manufacturing sector," said Nieves. "The Non-Manufacturing Business Activity Index increased 5.2 percentage points to 60 percent, reflecting growth for the fourth consecutive month. The New Orders Index increased 7.3 percentage points to 62.3 percent, and the Employment Index increased 1.2 percentage points to 49.8 percent. The Prices Index increased 2.5 percentage points to 62.9 percent in March, indicating an increase in prices paid from February. According to the NMI, 14 non-manufacturing industries reported growth in March. Respondents' comments are mostly positive about business conditions and the direction of the economy."

INDUSTRY PERFORMANCE (Based on the NMI)

The 14 industries reporting growth in March based on the NMI composite index — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Information; Management of Companies & Support Services; Retail Trade; Other Services; Accommodation & Food Services; Finance & Insurance; Wholesale Trade; Public Administration; Professional, Scientific & Technical Services; and Health Care & Social Assistance. The two industries reporting contraction in March are: Real Estate, Rental & Leasing; and Educational Services.

WHAT RESPONDENTS ARE SAYING ...

• "Business conditions have returned to normal (pre-recession). Our business is up significantly since 2009. We are very positive about the upcoming year." (Information)
• "Demand for loans, credit cards, mortgages and equity lending is expected to continue to increase." (Finance & Insurance)
• "Brisk business activity continues as more projects get 'green light.'" (Utilities)
• "Observing some relaxation on several fronts regarding spending and hiring. Still very cautious, but making investments where they make sense." (Retail Trade)
• "Limited funding available for development [and] expansions." (Accommodation & Food Services)
• "The economy appears to be holding its own; however, state and local funding is projected to decrease next fiscal year." (Educational Services)

 

ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS* MARCH 2010
	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	55.4	53.0	+2.4	Growing	Faster	3	59.6	56.5	+3.1
Business Activity/Production	60.0	54.8	+5.2	Growing	Faster	4	61.1	58.4	+2.7
New Orders	62.3	55.0	+7.3	Growing	Faster	7	61.5	59.5	+2.0
Employment	49.8	48.6	+1.2	Contracting	Slower	27	55.1	56.1	-1.0
Supplier Deliveries	49.5	53.5	-4.0	Faster	From Slowing	1	64.9	61.1	+3.8
Inventories	46.5	45.0	+1.5	Contracting	Slower	3	55.3	47.3	+8.0
Prices	62.9	60.4	+2.5	Increasing	Faster	8	75.0	67.0	+8.0
Backlog of Orders	55.5	46.0	+9.5	Growing	From Contracting	1	58.0	61.0	-3.0
New Export Orders	57.5	47.0	+10.5	Growing	From Contracting	1	61.5	56.5	+5.0
Imports	51.0	48.5	+2.5	Growing	From Contracting	1	57.0	56.0	+1.0
Inventory Sentiment	52.5	60.0	-7.5	Too High	Slower	154	N/A	N/A	N/A
Customers' Inventories	N/A	N/A	N/A	N/A	N/A	N/A	39.0	37.0	+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

Airfare (3); Cartons; Copper Fittings; Copper Products; Corrugated Products; #1 Diesel Fuel; #2 Diesel Fuel; Drywall/Gypsum Board; Fuel (3); Gasoline (5); Medical Supplies; Metal Studs; Paper (2); Paper Products; Plastic Bags; Plastic Film; Plastic Resin Products; Produce; Red Bell Peppers; Roofing Shingles; Steel Pipe and Fittings; Steel Products (2); and Tomatoes.

Commodities Down in Price

Beef (2); and Construction Labor.

Commodities in Short Supply

No commodities are reported in short supply.

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

 

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MARCH 2010 NON-MANUFACTURING INDEX SUMMARIES

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NMI (Non-Manufacturing Index)

In March, the NMI registered 55.4 percent, indicating growth in the non-manufacturing sector for the third 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
Mar 2010	55.4	Sep 2009	50.1
Feb 2010	53.0	Aug 2009	48.2
Jan 2010	50.5	Jul 2009	46.7
Dec 2009	49.8	Jun 2009	46.3
Nov 2009	48.4	May 2009	44.5
Oct 2009	50.1	Apr 2009	43.9
Average for 12 months — 48.9 High — 55.4 Low — 43.9

 

Business Activity

ISM's Non-Manufacturing Business Activity Index in March registered 60 percent, an increase of 5.2 percentage points when compared to the seasonally adjusted 54.8 percent registered in February. Thirteen industries reported increased business activity, and three industries reported decreased activity for the month of March. Two industries reported no change from February. Comments from respondents include: "Seeing an increase in business. Our customers are feeling more optimistic"; and "New year budgets, as well as replacing inventories depleted during 2009."

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

 

Business Activity	% Higher	% Same	% Lower	Index
Mar 2010	37	50	13	60.0
Feb 2010	23	57	20	54.8
Jan 2010	26	44	30	52.2
Dec 2009	26	50	24	53.2

 

New Orders

ISM's Non-Manufacturing New Orders Index grew in March for the seventh consecutive month. The index registered 62.3 percent, which is an increase of 7.3 percentage points from the seasonally adjusted 55 percent reported in February. Comments from respondents include: "Improving sales trend; capital money flowing with the start of a new year"; "More bids; work starting"; and "Prime selling month."

The 14 industries reporting growth of new orders in March — listed in order — are: Management of Companies & Support Services; Utilities; Information; Mining; Accommodation & Food Services; Retail Trade; Construction; Other Services; Health Care & Social Assistance; Transportation & Warehousing; Public Administration; Wholesale Trade; Finance & Insurance; and Educational Services. The only industry reporting contraction of new orders in March is Real Estate, Rental & Leasing.

 

New Orders	% Higher	% Same	% Lower	Index
Mar 2010	37	49	14	62.3
Feb 2010	23	59	18	55.0
Jan 2010	26	49	25	54.7
Dec 2009	22	55	23	52.0

 

Employment

Employment activity in the non-manufacturing sector contracted in March for the 27th consecutive month. ISM's Non-Manufacturing Employment Index for March registered 49.8 percent. This reflects an increase of 1.2 percentage points when compared to the seasonally adjusted 48.6 percent registered in February. Six industries reported increased employment, eight industries reported decreased employment, and four industries reported unchanged employment compared to February. Comments from respondents include: "We are staffing to volume" and "Jobs are not being filled pending budget issues."

The industries reporting an increase in employment in March — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Other Services; Construction; Retail Trade; Information; and Finance & Insurance. The industries reporting a reduction in employment in March — listed in order — are: Real Estate, Rental & Leasing; Health Care & Social Assistance; Professional, Scientific & Technical Services; Transportation & Warehousing; Public Administration; Educational Services; Wholesale Trade; and Management of Companies & Support Services.

 

Employment	% Higher	% Same	% Lower	Index
Mar 2010	16	65	19	49.8
Feb 2010	12	68	20	48.6
Jan 2010	10	62	28	44.6
Dec 2009	9	70	21	43.6

 

Supplier Deliveries

The Supplier Deliveries Index registered 49.5 percent in March, indicating supplier deliveries were faster in March when compared to February. A reading above 50 percent indicates slower deliveries.

The five industries reporting slower deliveries in March are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Wholesale Trade; and Transportation & Warehousing. The four industries reporting faster supplier deliveries in March are: Information; Utilities; Retail Trade; and Finance & Insurance.

 

Supplier Deliveries	% Slower	% Same	% Faster	Index
Mar 2010	8	83	9	49.5
Feb 2010	12	83	5	53.5
Jan 2010	9	83	8	50.5
Dec 2009	8	85	7	50.5

 

Inventories

ISM's Non-Manufacturing Inventories Index registered 46.5 percent in March, indicating that inventory levels contracted in March for the third consecutive month. Of the total respondents in March, 31 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Continued improvement in inventory turns" and "Inventory drawdown."

The five industries reporting an increase in inventories in March are: Other Services; Agriculture, Forestry, Fishing & Hunting; Utilities; Wholesale Trade; and Information. The nine industries reporting decreases in inventories in March — listed in order — are: Transportation & Warehousing; Retail Trade; Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Management of Companies & Support Services; Public Administration; Finance & Insurance; Accommodation & Food Services; and Health Care & Social Assistance.

 

Inventories	% Higher	% Same	% Lower	Index
Mar 2010	21	51	28	46.5
Feb 2010	14	62	24	45.0
Jan 2010	16	61	23	46.5
Dec 2009	21	61	18	51.5

 

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in March. ISM's Non-Manufacturing Prices Index for March registered 62.9 percent, 2.5 percentage points higher than the seasonally adjusted 60.4 percent reported in February. In March, the percentage of respondents reporting higher prices is 32 percent, the percentage indicating no change in prices paid is 63 percent, and 5 percent of the respondents reported lower prices.

In March, 14 industries reported an increase in prices paid, in the following order: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Construction; Mining; Wholesale Trade; Management of Companies & Support Services; Educational Services; Finance & Insurance; Utilities; Professional, Scientific & Technical Services; Health Care & Social Assistance; Public Administration; Retail Trade; and Accommodation & Food Services. The only industry reporting prices as decreasing for the month of March is Information.

 

Prices	% Higher	% Same	% Lower	Index
Mar 2010	32	63	5	62.9
Feb 2010	21	73	6	60.4
Jan 2010	27	64	9	61.2
Dec 2009	19	73	8	59.6

 

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew in March for the first time after four consecutive months of contraction. The index registered 55.5 percent, 9.5 percentage points higher than the 46 percent reported in February. Of the total respondents in March, 47 percent indicated they do not measure backlog of orders.

The eight industries reporting an increase in order backlogs in March — listed in order — are: Real Estate, Rental & Leasing; Construction; Utilities; Other Services; Accommodation & Food Services; Wholesale Trade; Finance & Insurance; and Professional, Scientific & Technical Services. The only industry reporting lower backlog of orders in March is Public Administration.

 

Backlog of Orders	% Higher	% Same	% Lower	Index
Mar 2010	22	67	11	55.5
Feb 2010	10	72	18	46.0
Jan 2010	13	65	22	45.5
Dec 2009	13	70	17	48.0

 

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 in March after contracting for three consecutive months. The New Export Orders Index for March registered 57.5 percent, which is 10.5 percentage points higher than the 47 percent registered in February. Of the total respondents in March, 72 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 March are: Transportation & Warehousing; Information; Accommodation & Food Services; Wholesale Trade; and Retail Trade. The only industry reporting a decrease in export orders in March is Professional, Scientific & Technical Services.

 

New Export Orders	% Higher	% Same	% Lower	Index
Mar 2010	21	73	6	57.5
Feb 2010	15	64	21	47.0
Jan 2010	15	62	23	46.0
Dec 2009	13	66	21	46.0

 

Imports

The ISM Non-Manufacturing Imports Index registered 51 percent, indicating growth for the month of March after two consecutive months of contraction. In the month of March, 62 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The three industries reporting an increase in the use of imports in March are: Information; Mining; and Accommodation & Food Services. The three industries reporting a decrease in imports for the month of March are: Construction; Transportation & Warehousing; and Retail Trade.

 

Imports	% Higher	% Same	% Lower	Index
Mar 2010	11	80	9	51.0
Feb 2010	11	75	14	48.5
Jan 2010	11	72	17	47.0
Dec 2009	17	71	12	52.5

 

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in March registered 52.5 percent. This is 7.5 percentage points lower than the 60 percent reported in February, indicating that respondents believe their inventories are slightly high at this time. In March, 20 percent of respondents said their inventories were too high, 15 percent said their inventories were too low, and 65 percent said their inventories were about right.

The five industries reporting a feeling that their inventories are too high in March are: Other Services; Utilities; Transportation & Warehousing; Accommodation & Food Services; and Health Care & Social Assistance. The three industries reporting that inventories are too low in March are: Management of Companies & Support Services; Retail Trade; and Public Administration.

 

Inventory Sentiment	%Too High	%About Right	%Too Low	Index
Mar 2010	20	65	15	52.5
Feb 2010	26	68	6	60.0
Jan 2010	33	63	4	64.5
Dec 2009	23	76	1	61.0

 

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. ISM, established in 1915, is the largest supply management organization in the world as well as one of the most respected. Its mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education.

The next Non-Manufacturing ISM Report On Business, featuring the April 2010 data, will be released at 10 a.m. (ET) on Wednesday, May 5.