Subscribe to our free, weekly email newsletter!


ISM Non-Manufacturing Index points to growth in November

By Jeff Berman, Group News Editor
December 03, 2010

The Institute of Supply Management’s (ISM) Non-Manufacturing Report on Business for November remained on the growth path it has been on for nearly a year.

The ISM’s index for measuring the sector’s overall health—known at the NMI—was 55.0 in November, a 0.7 percent increase from October. Like the ISM’s Manufacturing Report on Business, a reading above 50 represents growth. October’s NMI showed growth for the 11th consecutive month, with the index above 50 over that timeframe.

Three of the NMI’s core metrics were up in November. The Business Activity/Production Index at 57.0 was down 1.4 percentage points. But New Orders at 57.7 were up 1.0 percentage points, and Employment at 52.7 was up 1.8 percentage points.

“It is nice to see continued growth, which is slow and steady,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “But it leads me to believe that slow, incremental growth is more sustainable than some quick spikes followed by contractions.”

Even though Business Activity/Production was down a bit in November, Nieves said growth in New Orders balanced that out heading into December. But he cautioned that with Employment up nearly 2 percent—and being a seasonally-adjusted index, driven largely by retail—the holiday season to date has been better than expected. He said this shows how companies were gearing up for the holidays, with even companies that do not directly service retail being on the periphery and impacting consumer spending at the holidays.

And when the holiday season ends, Nieves said there is likely to be a bit of a pullback with employment numbers by February when the January numbers come out.

November Prices at 63.2 were down 5.1 percent from October. Nieves said this decline indicates that prices are increasing fast but not as fast as they were before. But with the index well above 50, he explained that Prices remain very strong.

“These prices are more commodity-driven,” said Nieves. “Fuel factors into that, and cotton is too right now, with cotton prices being the highest we have seen in more than 100 years. Cable and copper also have strong price points.”

Supplier Deliveries (up 1.5 percent at 52.5), Inventories (up 4.0 percent at 51.5), and Backlog of Orders (down 0.5 percent at 51.5) were all above 50 in November. As activity increases, Nieves said he would like to deliveries slowing at a faster rate as it starts getting into the upper 50s, and an increase in Inventories’ build up reflects great demand, which along with order backlog, ties directly with inventories and speed of delivery to end users.

“Those three metrics—as we see them growing—will give us an indication of if the economy is going to continue at a good strong pace,” said Nieves.

Should these indices continue to show steady growth over 50, it is likely to translate into good news for freight transportation demand and warehouse and distribution center growth.

And when whole sellers start to see increased sales activity in the non-manufacturing sector, which result in truck capacity shortages and deliveries slowing, in conjunction with whole seller business activity up, it is a positive sign, according to 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

APICS and ASTL said they have signed off on an agreement in which AST&L will merge with APICS upon ratification by an AST&L member vote.

The average price per gallon of diesel rose 4.3 cents to $2.854 per gallon, following gains of 3.1 cents and 2.6 cents, respectively, the previous two weeks for a cumulative ten cent gain over the last three weeks.

The index ISM uses to measure non-manufacturing growth—known as the NMI—was 57.8 in April which was 1.3 percent above March and also 0.5 percent above the 12-month average of 57.3. Economic activity in the non-manufacturing sector has grown for the last 63 months, according to ISM.

Non asset-based 3PL XPO Logistics reported solid first quarter earnings last night, with total gross revenue seeing a 148.9 percent annual gain at $703.0 million and net revenue up 349.0 percent to $262.2 million. Despite the significant gains in total gross revenue and net revenue, the company had a $14.7 million quarterly net loss, which marked an improvement compared to a $28.3 million net loss a year ago.

So far, so good may be the best way to describe the current state of progress in the negotiating process regarding the announcement made last month by FedEx that it plans to acquire Netherlands-based TNT-NV and a provider of mail and courier services and the fourth largest global parcel operator for $4.8 billion.

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