ISM reports 2015 non-manufacturing activity ends with growth
The index ISM uses to measure non-manufacturing growth—known as the NMI—was 55.3 in December (a level of 50 or higher indicates growth), was dropped 0.6 percent from November.
Non-manufacturing activity finished 2015 with growth, even with a slight decline in its key metric, according to the most recent edition of the Non-Manufacturing Report on Business from the Institute for Supply Management (ISM).
The index ISM uses to measure non-manufacturing growth—known as the NMI—was 55.3 in December (a level of 50 or higher indicates growth), was dropped 0.6 percent from November. The current PMI is 1.9 percent below the 12-month average of 57.2, and the non-manufacturing sector has grown for 71 straight months, while the overall economy has now grown for 77 straight months.
Aside from the PMI, each of the report’s other three key metrics grew in December. Business Activity/Production rose 0.5 percent to 58.7, and grew for the 77th straight month. New orders increased 0.7 percent to 58.2 while showing growth for the 77th month, and employment was up 0.7 percent to 55.7 in growing for the 22nd month in a row.
The majority of comments submitted to the report by ISM members were largely positive. A wholesale trade respondent said that the supply chain is faster than in previous years and equipment is more readily available, and a retail trade respondent said that holiday shopping was in line with its forecast.
While three of the reports four key metrics grew, with the NMI slightly off, ISM attributed the NMI’s decrease to faster supplier deliveries in December, which came in at 48.5 compared to November’s 53.0, with a reading below 50 percent indicating faster deliveries.
“Deliveries were expedited before the holidays and we saw that in September, October, and the first part of November,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee. “Everybody was getting geared up for the holiday season, and there was enough logistics equipment on hand. So for deliveries for December the ability to move product quickly happened, and imports were down (-2.0 to 49.0 in December), because there was a forward bump due to the holidays with deliveries expedited ahead of time. That leaves the ability to handle all of this capacity from the preceding months and you don’t have as much moving through even though deliveries are now faster.”
December inventories fell 1.5 percent to 53.0 but still grew for the ninth month in a row, and prices fell 0.6 percent to 49.7 shifting to contraction, and backlog of orders was flat at 50.0.
When asked about the NMI’s prospects for maintaining its healthy growth rate in the mid-50s, Nieves said all indications suggest it will remain on the current path of steady, slow incremental growth it has been on for the last 71 months, barring an unforeseen significant event.
“Everything indicates it will be positive going forward,” he said. “More than 80 percent of total GDP comes from non-manufacturing. We expect this growth to continue.”
About the AuthorJeff 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
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