ISM reports October is best month for non-manufacturing in more than seven years

The index ISM uses to measure non-manufacturing growth—known as the NMI—eked out a 0.3% increase to 60.1 (a reading above 50 indicates growth). While the increase was slight, this reading marks the highest reading the NMI has hit since the report’s inception in 2008, as well as the highest reading compared to pre-2008 composite index calculations, with an August 2005 high of 61.3.

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The Institute for Supply Management (ISM) reported today the non-manufacturing activity in October was again strong.

The index ISM uses to measure non-manufacturing growth—known as the NMI—eked out a 0.3% increase to 60.1 (a reading above 50 indicates growth).

While the increase was slight, this reading marks the highest reading the NMI has hit since the report’s inception in 2008, as well as the highest reading compared to pre-2008 composite index calculations, with an August 2005 high of 61.3. The PMI has grown for 94 consecutive months, and the October reading is 5.3% above the 12-month average of 56.9.

ISM said that 16 non-manufacturing industries reporting growth in September, including: Agriculture, Forestry, Fishing & Hunting; Construction; Transportation & Warehousing; Mining; Real Estate, Rental & Leasing; Utilities; Other Services; Wholesale Trade; Management of Companies & Support Services; Retail Trade; Finance & Insurance; Health Care & Social Assistance; Public Administration; Information; Professional, Scientific & Technical Services; and Accommodation & Food Services. The two industries reporting contraction in October are: Educational Services; and Arts, Entertainment & Recreation.

Including the PMI, most of the report’s core metrics saw gains in October.

Business activity/production headed up 0.9% to 62.2, growing for the 99th consecutive month. New orders dipped 0.2% to 62.8 and also grew for the 99th consecutive month, with 16 industries reporting growth for this reading. Employment was up 0.7% to 57.5, showing growth for the 44th consecutive month. Inventories were up 1.0% to 52.5 while still growing for the seventh straight month.

Comments submitted to the report by ISM member respondents were in line the report’s positive readings.

A management of companies & support services respondent said that business is strong, driven by large upticks in business from clients in the retail industry, while adding that the seasonal surge is starting out stronger than in a normal year. And a wholesale trade respondent noted that the outlook is favorable, while labor is in short supply and is constraining growth.

“This report is in line with what our correspondents have been telling us over the past few months,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee. “After the cooling off period in July, August had a rebound, with September strong. Heading into the fourth quarter, all the indications were based on what was in the pipeline was going to be strong, which has now materialized.”

As for what is driving these gains, Nieves pointed to higher confidence levels and increased economic activity, with things moving at a good clip.

“I would not have expected the [NMI] to move up,” he said. “If anything, a sideways move or a sustained leveling in growth in line with the baseline would have been fine. Things really still are strong and reflecting a very good rate of growth on a month-to-month basis.”

Looking ahead, Nieves explained that the strong new orders reading shows how there is a lot of growth in the pipeline that figures to show up over the balance of 2017, saying that even if activity were to tail off slightly, things would still be at a solid level on the non-manufacturing front.

“I am feeling pretty confident, too, that there will be a strong holiday season,” he said. “We knew there was commercial confidence out there, but we were not as sure about consumer confidence. It will be interesting to see what happens in terms of consumers spending more money this holiday season.”


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

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