ISM Non-Manufacturing: Continued Growth In November

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by: Doug Short

By Jill Mislinski

The Institute of Supply Management (ISM) has now released the November Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 60.7 percent, up 0.4 from 60.3 last month. Today's number came in above the Investing.com forecast of 59.2 percent.

Here is the report summary:

"The NMI® registered 60.7 percent, which is 0.4 percentage point higher than the October reading of 60.3 percent. This represents continued growth in the non-manufacturing sector, at a slightly faster rate. The Non-Manufacturing Business Activity Index increased to 65.2 percent, 2.7 percentage points higher than the October reading of 62.5 percent, reflecting growth for the 112th consecutive month, at a faster rate in November. The New Orders Index registered 62.5 percent, 1 percentage point higher than the reading of 61.5 percent in October. The Employment Index decreased 1.3 percentage points in November to 58.4 percent from the October reading of 59.7 percent. The Prices Index rose 2.6 percentage points from the October reading of 61.7 percent to 64.3 percent, indicating that prices increased in November for the 33rd consecutive month. According to the NMI®, 17 non-manufacturing industries reported growth. The non-manufacturing sector continued to reflect strong growth in November. However, concerns persist about employment resources and the impact of tariffs. Respondents remain positive about current business conditions and the direction of the economy." [Source]

Unlike its much older kin, the ISM Manufacturing Series, there is relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows the Non-Manufacturing Composite. We have only a single recession to gauge its behavior as a business cycle indicator.

The more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point, at 65.2 percent, is up 2.7 from a seasonally adjusted 62.5 the previous month.

ISM Non-Manufacturing

For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualize the short-term trends.

Theoretically, this indicator should become more useful as the time frame of its coverage expands. Manufacturing may be a more sensitive barometer than Non-Manufacturing activity, but we are increasingly a services-oriented economy, which explains our intention to keep this series on the radar.

Here is a table showing the trend in the underlying components.

ISM Non-Manufacturing Survey Results At A Glance Comparison Of ISM Non-Manufacturing And ISM Manufacturing Surveys*
November 2018

Non-Manufacturing Manufacturing
Index Series Index Nov Series Index Oct Percent Point Change Direction Rate of Change Trend** (Months) Series Index Nov Series Index Oct Percent Point Change
NMI / PMI 60.7 60.3 +0.4 Growing Faster 106 59.3 57.7 +1.6
Business Activity/ Production 65.2 62.5 +2.7 Growing Faster 112 60.6 59.9 +0.7
New Orders 62.5 61.5 +1.0 Growing Faster 94 62.1 57.4 +4.7
Employment 58.4 59.7 -1.3 Growing Slower 57 58.4 56.8 +1.6
Supplier Deliveries 56.5 57.5 -1.0 Slowing Slower 35 62.5 63.8 -1.3
Inventories 57.5 56.0 +1.5 Growing Faster 10 52.9 50.7 +2.2
Prices 64.3 61.7 +2.6 Increasing Faster 33 60.7 71.6 -10.9
Backlog of Orders 55.5 53.5 +2.0 Growing Faster 11 56.4 55.8 +0.6
New Export Orders 57.5 61.0 -3.5 Growing Slower 22 52.2 52.2 0.0
Imports 54.5 51.0 +3.5 Growing Faster 9 53.6 54.3 -0.7
Inventory Sentiment 60.0 62.0 -2.0 Too High Slower 258 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 41.5 43.3 -1.8
Overall Economy Growing Faster 111
Non-Manufacturing Sector Growing Faster 106

Non-Manufacturing ISM Report On Business data is seasonally adjusted for the Business Activity, New Orders, Prices and Employment Indexes Manufacturing ISM Report On Business data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries Indexes. *Number of months moving in current direction.

Here is a link to our coverage of the latest ISM Manufacturing report.

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