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ISM non-manufacturing index hits all-time high in August

By Jeff Berman, Group News Editor
September 05, 2013

While non-manufacturing activity in July had a very strong month, it was followed up by an even better one in August, according to the Institute for Supply Management’s (ISM) Non-Manufacturing Report on Business.

The ISM reported that its index used to measure growth—the NMI—hit its highest recorded level ever since its January 2008 introduction at 58.6 (a reading above 50 represents growth), representing a 2.6 percent gain over July’s 56.0. This NMI reading is ahead of the 12-month average of 55.0. Non-manufacturing activity has seen gains over the last 44 months. 

The report’s other key metrics were also up in August, with Business Activity/Production increasing 1.8 percent to 62.2, which is its highest reading since February 2011’s 63.5, and New Orders rose 2.8 percent to 60.5. Employment went up 3.8 percent to 57.0.

“We had a good month in July and were not sure if it was the beginning of a trend or maybe a head-fake, but a second month of strong growth with these numbers are encouraging,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “With these numbers there is sometimes an anchor with one of the metrics being down, but these four all have good readings, bringing the NMI to the level it is at.”

Nieves said he prefers to see how the numbers trend out over a three- or four-month period, but the last two months show a build-up in momentum, which he explained is a bit early and faster than what usually happens heading into the fourth quarter.

And with a key reading like New Orders being above 60, he said this bodes well over all heading into the fourth quarter.

This was also exemplified in the respondents’ comments section of the report, too, with a retail trade commenter citing how conditions continue to show improvement, and a construction respondent pointing to a flurry of activity in his company’s pipeline.

Looking at the ongoing growth in New Orders, Nieves highlighted how June’s 52.9 number increased nearly 5 percent to 57.7 in July en route to August’s 60.5 at a time when some “leveling” off could have been expected.

“There are indications that we could see continued growth throughout the year,” said Nieves. “Even if there is a blip on the screen between now and then, it is reasonable to expect. The question is at what type of rate of growth as two months does not make a trend and there is not a lot of other information out there supporting what this data is saying.  But this report has always been leading, and we have faith in it and have a wide cross-section of true representation of what is going on in the economy in non-manufacturing that it leads me to believe that this momentum may not be sustained at this current level but there will still be momentum through the rest of the year and beyond. “

August Employment in the NMI saw a 3.8 percent jump to 57.0, and Prices fell 6.7 percent to 53.4. Supplier Deliveries and Inventories were up 2.0 percent and 2.5 percent, respectively.

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).


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