Logistics and business news: ISM says despite price spike, non-manufacturing sector is on the rise
Sean A. Murphy, Associate Editor -- Logistics Management, 9/3/2009
TEMPE, Ariz.—The latest report on the non-manufacturing industry sector from the Institute for Supply Management (ISM) indicates non-manufacturing is still on course to enter positive territory later this fall, despite the highest-ever recorded spike in prices in August.
The report’s prices index leaped 21.8 percentage points to 63.1 percent in August, but Anthony Nieves, chair of ISM’s non-manufacturing business survey committee, said this would only have long-term impact on the sector if this trend continues, and he doubts that it will.
“I think this was just a blip on the screen,” he said.
Most notable, Nieves said, were prices for petroleum and petroleum-related products ranging from fuel to film, all of which spiked in August.
Despite this, however, other figures in the latest report support the idea that the sector is slowing inching toward growth. Once again, the Non-Manufacturing Index (NMI) was up by two percentage points to 48.4 percent.
“They’re still contracting, but at a much slower pace,” Nieves said.
In addition, the business activity index jumped 5.2 points to 51.3 percent, crossing the all-important 50 percent barrier into what is technically classified as “growth.” This is the first time the index has crossed 50 percent since September 2008. New orders nearly made it as well, stopping just shy at 49.9 percent, a 1.8-percentage-point increase.
Nieves called the business activity growth “very encouraging,” and said he will be watching to see if new orders also break 50 percent. Nieves said if both indices go above 50 percent, and manage to stay there, that will be “a good indicator” that the sector has officially entered a growth phase.
Overall, Nieves said he expects to see more signs from the sector of growth appearing by the end of this fall, which would be in line with ISM’s predictions earlier this year.
Part of Nieves’ prediction, he said, is dependent upon the manufacturing sector, which has shown clear signs of entering a growth phase. In 2001, non-manufacturing trailed manufacturing into and out of that recession, and this time, non-manufacturing also followed manufacturing into recession.
Given these facts, Nieves said it stands to reason that if the manufacturing sector is improving, the non-manufacturing sector is bound to, as well.
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