Subscribe to our free, weekly email newsletter!

Logistics business: ISM Non-Manufacturing Index is up in September

By Jeff Berman, Group News Editor
October 05, 2010

The Institute of Supply Management’s (ISM) Non-Manufacturing Report on Business recovered some of its losses from its previous report, with a 1.7 percent gain from August to September.

The ISM’s index for measuring the sector’s overall health—known as the NMI—was 53.2 in September. And like the ISM Manufacturing index, a reading above 50 represents growth; August represents the ninth consecutive month the NMI has topped 50.

In the NMI, the most heavily focused-upon metrics were somewhat mixed in September. The Business Activity/Production Index at 52.8 was down 1.6 percent from August, and New Orders at 54.9 were up 2.5 percent. Employment was up 2.0 percent at 50.2.

“We are seeing a fairly strong report that gives us an indication that we are seeing some signs of stabilization,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “We will likely see some slow growth moving forward, but the key thing…is the employment index being up for the third time in the last five months.”

The fluctuation of the Employment index in recent months has created what Nieves called a “seesaw effect,” which has been a laggard on the NMI’s composite index (Business Activity/Production, New Orders, and Employment) over the last few years, going back to August 2008, when Employment was consistently over 50.

Until this happens again, there is unlikely to be a more meaningful uptick on non-manufacturing activity, said Nieves. And when the Employment index dips down, it is forced to start at a lower baseline point than before.

Despite the employment situation, Nieves maintains there is cause for optimism when it comes to future growth, including the “official” end of the recession, companies with cash on hand starting to build up confidence and start to make new investments into their businesses on the capital side and the human resources side.

The NMI’s Prices’ index came in at 60.1 in September, down 0.2 percent from August for an essentially flat month and on the heels of a 7.6 percent gain from July to August. With slower growth occurring in the most recent report, Nieves said it is important to realize these indices measure the rates of change, adding that prices are increasing month to month as long as the index remains above 50.

“With prices, we are seeing some which are market-based commodities going up, but it is not about pricing power, it is more about fuel and petroleum-based products and anything related to that increasing in cost,” said Nieves.

Gains in cotton prices, which are at their highest levels in about 30 years, are driving some of these increases in the textile industry, said Nieves, who added that copper is on the rise as well.

Inventories in the NMI fell 6.5 percent to 47.0 after five months of growth. Nieves said that if the decline in inventories were to meet Business Activity/Production (which was 52.8 in September) that as people and companies were more conservative they were burning off existing inventory to fill orders.

The reason for this, he said, is that the NMI’s Backlog of Orders fell 2.5 percent to 48.0 in September.

“This means to me that orders are being filled off of existing inventory, and the reason why Supplier Deliveries at 55.0 percent are slower correlates to the tight capacity environment in the trucking market, which has led to decreased cycle time and slower deliveries,” said Nieves.

About the Author

Jeff Berman headshot
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. .(JavaScript must be enabled to view this email address).

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!

Recent Entries

The NRF is calling for 2015 holiday sales to see a 3.7 percent annual gain to $630.5 billion, which comfortably outpaces the ten-year average of 2.5 percent.

On the heels of announcing it plans to acquire freight transportation and logistics services provider Con-way Inc. for $3 billion, XPO Logistics may be considering selling off Con-way Truckload, the company’s truckload arm.

The International Air Cargo Association (TIACA) has called on world leaders meeting at the United Nations this week to work together to find solutions to the ongoing migrant crisis in Europe

More than 20 U.S. port authority officials and their key staff, representing seaports from all four U.S. coasts, will gather on October 8 to meet with Congressional leadership to discuss the upcoming surface transportation bill and the U.S. Army Corps of Engineers’ navigation budget.

Companies used to compete on price and service. The future of supply chain, according to Steve Melnyk, is culture. In fact, innovators like Apple, Google, and Unilever are already leading because of their cultures. Your company can too.


Post a comment
Commenting is not available in this channel entry.

© Copyright 2015 Peerless Media LLC, a division of EH Publishing, Inc • 111 Speen Street, Ste 200, Framingham, MA 01701 USA