ISM October non-manufacturing report is nearly identical to September, still growing

{lm_summary}

By ·

Like its companion report focused on manufacturing, growth remained the primary theme for the Institute for Supply Management (ISM)’s Non-Manufacturing Report on Business, which showed growth in non-manufacturing sector grew for the 23rd consecutive month.

The ISM’s index for measuring the sector’s overall health—known as the NMI—was 52.9 in October, down 0.1 percent from September. A reading above 50 represents growth.

The September ISM Manufacturing Report on Business, which was also released this week, was down 0.8 percent but still grew at 50.8.

Of the NMI’s four core metrics, one was up in October compared to September. Business Activity/Production was down 3.3 percent at 53.8. New Orders were down 4.1 percent at 52.4, and Employment rose 4.6 percent to 48.7.

“Sometimes people look at this report and see the PMI down and assume things are bad, but that is not the case,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “What people sometimes fail to realize is that each month the baseline changes and growth is still occurring month over month. We had a fast rate of growth for Business Activity and New Orders last month (September), and it today’s economy it is tough to sustain those levels of growth month-over-month.”

While non-manufacturing business activity dipped down a bit and September New Orders at a relatively high level of 56.5—prior to the 4.1 percent dip in October—typically transposes into increased business activity if not the following month, then months thereafter, Nieves said it is key to see how things trend out and what the impact is on a trend relative to three months versus a single month.

That said, Nieves explained the current level for Business Activity of 53.8 remains solid, as it remains in line with what was forecasted by ISM respondents last spring, when they called for slow incremental growth month-over-month, which would carry through 2011—with a slight uptick during holiday shopping season—and possibly into 2012.

“This is right on track where we thought it would be,” he said. “We would like to see it in the mid-50’s range, but that is not reality. There are too many other factors involved, and it is related to things like employment, consumer confidence, and all the global turmoil occurring, which is pulling back on spending patterns. We are not seeing as much capital reinvestment and companies loosening the purse strings. It is all integrated. We could very well finish the year up at these current levels.”

Looking at inventories dropping 6.0 percent to 45.5, Nieves said to October decline was due in part to a good but not great September, with some subsequent drop off to be expected. And the continued emphasis on cash flow and managing inventories has been ongoing inventory management-related themes for several months, according to Nieves.

On the Prices side, October dropped 4.8 percent to 57.1 for non-manufacturing. Nieves said this is directly attributed to the prices of fuel, which has a direct effect on the pricing index, coupled with demand being down slightly, resulting in a volume drop off.

“Competition as been reduced with some companies going away, but those that remain are highly competitive and have to compete harder for business,” said Nieves.


About the Author

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. Contact Jeff Berman

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!

Latest Whitepaper
Improving Packaging: The Cost of Shipping Air is Going Up
Retailers and manufacturers that insist on using inefficient and sloppy packaging methods—oversized boxes, inefficient packaging, poorly constructed palletized contents—are paying for their mistakes in sharply higher freight rates. Pitt Ohio White Paper, Logistics White Paper, Dimensional Packaging
Download Today!
From the July 2016 Issue
While it’s currently a shippers market, the authors of this year’s report contend that we’ve entered a “period of transition” that will usher in a realignment of capacity, lower inventories, economic growth and “moderately higher” rates. It’s time to tighten the ties that bind.
2016 State of Logistics: Third-party logistics
2016 State of Logistics: Ocean freight
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Getting the most out of your 3PL relationship
Join Evan Armstrong, president of Armstrong & Associates, as he explains how creating a balanced portfolio of "Top 50" global and domestic partners can maximize efficiency and mitigate risk.
Register Today!
EDITORS' PICKS
Regional ports concentrate on growth and connectivity
With the Panama Canal expansion complete, ocean cargo gateways in the Caribbean are investing to...
Digital Reality Check
Just how close are we to the ideal digital supply network? Not as close as we might like to think....

Top 25 ports: West Coast continues to dominate
The Panama Canal expansion is set for late June and may soon be attracting more inbound vessel calls...
Port of Oakland launches smart phone apps for harbor truckers
Innovation uses Bluetooth, GPS to measure how long drivers wait for cargo