Subscribe to our free, weekly email newsletter!


ISM December non-manufacturing report is up for 25th straight month

By Jeff Berman, Group News Editor
January 05, 2012

While November marked the two-year anniversary of consecutive growth in the non-manufacturing sector, December made sure the push for three straight growth years got moving in the right direction, according to the Institute for Supply Management (ISM).

The ISM’s index for measuring the sector’s overall health—known as the NMI—checked in at 52.6 in December up 52 from November,  and down slightly from October’s 52.9. A reading above 50 represents growth.

The December ISM Manufacturing Report on Business, which was released earlier this week, was up 1.2 percent at 53.9.

Each of the core metrics for the report was flat or grew, albeit slightly from November to December. Business Activity/Production was flat at 2.4 percent at 56.2, and New Orders were up 0.2 percent at 53.2. Employment rose 0.5 percent to 49.4. Prior to December, the PMI had fallen in three of the previous four months, with November representing the lowest PMI reading since January 2010.

“This is slow growth,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “Employment continues to lag, though. Our respondents are measuring what they add month over month for their respective companies. It is very much mixed, with some adding jobs and growing and some holding tight.”

The combination of slow growth and non-manufacturing companies expecting very little capital reinvestment points to future growth—in the form of new orders and business activity—continuing to advance at a relatively slow pace, said Nieves. But employment is likely to continue to me a drag on the report’s other metrics as limited employment gains are being predicted.

Even with slow growth being prevalent, ISM member companies that were surveyed for the report were optimistic in their thoughts about business conditions in December. Respondents cited things like a year-end uptick in activity, stabilizing business, and gradual increases in demand, among others.

“These comments speak to slight optimism,” said Nieves. “They are reflective of what the report is indicating, according to company and industry as a whole.”

With Business Activity/Production flat at 52.6, it is largely viewed as a good sign, considering the myriad concerns regarding the economy.

But with the NMI being seasonally-adjusted, coupled with a post-holiday lull driven by a holiday shopping retail uptick, Nieves said that can both drive the numbers up a bit and also mask total activity.

“We typically see a bit of a dip downward in January which then comes back up, so we need to look at the first quarter collectively rather than each individual month,” said Nieves.

Following a 7.0 percent gain in November inventories, December saw them fall 4.0 percent to 48.5.

When this data came into ISM, Nieves explained that it is in conjunction with year-end activity for companies, which is prime time for reducing inventory levels, rather than replenishing inventory.

“This number was not surprising, given where backlog of orders came in (down 2.5 percent to 45.5), as companies were burning off inventory and reducing the amount of backlog in the system before year-end to get their numbers up,” said Nieves.

Prices were down 1.3 percent to 61.2, and while they were down from November Nieves noted they still remain at a strong level while growing at a slightly slower rate. 

While non-manufacturing data typically lags behind manufacturing data coming in an out of a recession, Nieves said if non-manufacturing can match manufacturing levels in the next quarter, it will serve as a strong sign of growth and momentum as non-manufacturing makes up 80 percent of all economic activity.

“If that is happening, we will know we are in good shape,” said Nieves.

About the Author

Jeff Berman headshot
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff works and lives in Cape Elizabeth, Maine, where he covers all aspects of the supply chain, logistics, freight transportation, and materials handling sectors on a daily basis. .(JavaScript must be enabled to view this email address).


Subscribe to Logistics Management magazine

Subscribe today. It's FREE!
Get timely insider information that you can use to better manage your
entire logistics operation.
Start your FREE subscription today!

Recent Entries

The high-volume warehouse or distribution center that supports B2B, Omni-channel activities, direct-to-consumer shipments, and the Internet of Things all require a flexible and scalable supply chain in order to function at optimal capacity. The problem is that most of today's supply chains are made up of fragmented silos of information that compromise their ability to compete, be responsive to customer demands or seize new business opportunities.

As customers' demands constantly evolve, transportation and logistics (T&L) operations are being put under growing pressure to offer more efficient delivery services, while not compromising on customer service. Using findings from a research survey conducted among transport and logistics managers around the world, this report explores how a combination of mobile technology implementations for mobile workers, and process re-engineering efforts can elevate operations to the next level.

It's a fact - most best-of-breed WMS providers force you to pay every time you require a system change. Uncover five more dirty secrets many warehouse management systems providers don't want you to know. Download the white paper 5 Dirty Secrets of Warehouse Management Systems to discover these hidden truths and gain valuable information on considerations for evaluating WMS vendors.

Not Sure? The Whitepaper "Stay or Switch" Provides the Research Necessary for You to See How Well Your Provider Stacks Up!

Too many companies invest in ERP systems but do not achieve the business benefits they anticipated. Sometimes, the ERP solution never fits the way your people and processes work.

Comments

Post a comment
Commenting is not available in this channel entry.


© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA