ISM says non-manufacturing activity in June is still seeing growth

Non-manufacturing activity took a dip in June but remained in growth territory, according to the June edition of the Institute of Supply Management’s (ISM) Non-Manufacturing Report on Business.

By ·

Non-manufacturing activity took a dip in June but remained in growth territory, according to the June edition of the Institute of Supply Management’s (ISM) Non-Manufacturing Report on Business.

ISM said that the index used to measure non-manufacturing growth—known as the NMI—was 52.2 in May, down 1.5 percent from May. June’s PMI is 2.2 percent below the 12-month average of 54.4. Non-manufacturing activity increased for the 42nd consecutive month in June, said ISM. 

A reading above 50 represents growth. Earlier this week, the ISM reported that the PMI, the index on which the ISM’s Manufacturing Report on Business is based on, increased 1.9 percent to 50.9 in June. This is below the 12-month average of 51.2.

Including the PMI, three of the report’s four key metrics were up in June. Business Activity/Production shrunk 4.8 percent increase to 51.7, and New Orders were down 5.2 percent at 50.8. Employment was the lone core metric showing growth, up 4.6 percent to 54.7.

“There is still growth here month-over-month, even though the rate slowed down,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “The decline in New Orders does not mean they are not growing; it just means the rate is slower.”

At the mid-year point, Nieves said non-manufacturing remains in a slow-growth, incremental phase, while Employment had room for improvement. But that could be changing as evidenced by today’s report from Reuters that the ADP National Employment Report said U.S. companies added 188,000 jobs in June, exceeding median forecast of 160,000 among economists polled by Reuters and was higher than a slightly downgraded 134,000 increase in May.

Nieves said type of job growth could translate into better things in the future, due to the fact that more people at work equates into increased consumer confidence, which can help to spur retail sales and other economic activity.

Business/Activity and Production’s reading of 51.7 was its lowest monthly reading since November 2009, when it was at 50.9.

“There was a decline, but this is a moving baseline,” said Nieves. “The decline in growth percentage is not reflective of the rate. It has more to do with speed and timing and not necessarily total output and volume if we were to compare it to something numerical, which is hard to due because of the fluctuation from month-to-month.”

June Inventories and Prices were up 3.0 percent and 1.4 percent, respectively.

Nieves said there was such a concentrated effort on reducing inventory for a longer period of time that when orders and business activity went up, the inventory was not there.

“Our respondents’ comments indicated they had to build up inventory, because they did not have the capacity to handle what was coming in,” he said. “That is why we are seeing deliveries slow down slightly and backlog has grown a little bit.

Prices were up for the 45th straight month, with Nieves explaining the gains have largely been driven by petroleum and oil-based products with little actual pricing power otherwise evident.


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!

Article Topics

All Topics
Latest Whitepaper
How Lean is your Lean Quality Program?
Avoid quality program bureaucracy that can sap logistics productivity and increase costs
Download Today!
From the September 2016 Issue
Indecision revolving around three complex supply chain elements—transportation, technology and organizational structure—finds many companies waiting to commit to a strategic path. However, waiting too long will only result in a competitive disadvantage that will be difficult to overcome in today’s fast-paced, global economy.
Time for Asia’s ports to rebuild
Is the freight recession upon us…again?
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Supply Chain Best Practices: Visibility to In-Transit Inventory
During this webcast you'll learn on how various organizations have gained instant access to in-transit parcels and given access to this information to stakeholders.
Register Today!
EDITORS' PICKS
25th Annual Masters of Logistics
Indecision revolving around three complex supply chain elements—transportation, technology and...
2016 Quest for Quality: Winners Take the Spotlight
Which carriers, third-party logistics providers and U.S. ports have crossed the service-excellence...

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....