Logistics business: ISM Non-Manufacturing Index is down but continues to show growth

By ·

Like its companion report, which focuses on the manufacturing sector, the Institute of Supply Management’s (ISM) June report on the non-manufacturing sector showed continued growth albeit at a reduced rate.


The ISM’s index for measuring the sector’s overall health—known as the NMI—hit 53.8 percent in June, a 1.6 percent decline from May. And like the ISM’s manufacturing index, a reading above 50 percent or higher represents growth. June marks the sixth consecutive month the NMI is more than 50 percent.

The sequential decline in the NMI carried over to other key metrics of the report, including: the Business Activity Index down 3 points to 58.1 percent; the New Orders Index down 2.7 points to 54.4 percent; the Employment Index down 0.7 percentage points to 49.7 percent; and the Prices Index down 6.8 points to 53.8 percent.

“We are still in growth mode, but it is slowing somewhat,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview.

“This is indicative of what other recent economic reports are also saying as the economy is starting to moderate. The key is we still have growth in New Orders although it is softer than the previous month. It is disappointing to see unemployment down, but that is reflective of what we are seeing elsewhere in the economy.”

Other NMI metrics that took a step back in June were Inventories, which declined by 4.0 percent to 58.5, Backlog of Orders, which fell 0.5 percent to 55.5, New Export Orders, which fell 5.5 percent to 48.0 percent, and Imports, which fell 8.5 percent to 48.0.

Nieves said the trending down of these metrics is consistent with previous summer months in that there is typically a bit of a dip in these numbers. Regarding Exports, he explained that about 70 percent of ISM NMI respondents do not perform, or do not separately measure orders for work outside of the U.S. But 30 percent, which is a strong number do, adding that the economic unrest in Europe and market declines in Asia are dinting export performance.

And with retail sales and consumer confidence data showing declines of late, Nieves said the second half of the year needs to show some sustained growth.

“We want to see sustainable growth,” said Nieves. “So even if the growth is slow and the [NMI] stays above 50 and does not contract, it is good. The economy will likely be stronger in 2011 but in 2010—as long as we stay on the path of slow, incremental, sustainable growth—we are in good shape.”


About the Author

Jeff Berman
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
Reduce Order Processing Costs by 80%
Sales order automation software will seamlessly transform inbound emailed and printed purchase orders into electronic sales orders that can be automatically processed into your ERP system with 100% accuracy.
Download Today!
From the June 2016 Issue
In the wildly unstable ocean cargo carrier arena, three major consortia are fighting for market share, with some players simply hanging on for survival. Meanwhile, shippers may expect deployment shifts as a consequence of the Panama Canal expansion.
WMS Update: What do we need to run a WMS?
Supply Chain Software Convergence: Synchronization Realized
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Optimizing Global Transportation: How NVOCCs Can Use Technology to Operate More Profitably
Global transportation isn't getting any easier to manage, especially for non-vessel operating common carriers (NVOCCs). Faced with uncertainties like surcharges—but needing to remain competitive when bidding against other providers—NVOCCs need the right mix of historical data, data intelligence, and technology support to make quick and effective decisions. During this webcast you'll learn how Bolloré Transport & Logistics was able to streamline its global logistics and automate contract management.
Register Today!
EDITORS' PICKS
Details Key to Cross-border Ease
Ever-changing regulations are making it risky for U.S. companies engaged in cross-border trade...
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