ISM Report: More sideways movement for NMI

Business in the non-manufacturing index was slightly up in September, though down overall in the last year.

-- Modern Materials Handling, 10/7/2008

Little change was in the diverse non-manufacturing sector in September, according to the Institute of Supply Management’s Report on Business, with the non-manufacturing index coming in at 50.2%, down 0.4 percentage points from August.

Though there have been only small changes month to month, business is down overall since January. Each month, the baseline of change has gone down.

“It’s more of a sideways movement,” Anthony Nieves, chair of the ISM Non-Manufacturing Business Survey Committee, told Modern. “If you look back to the level of business 18 or 12 months ago, it’s actually slower or less than we are today.”

The biggest change was in inventories, down eight percentage points to 45.5%, indicating contraction. Prices increased for the 64^th consecutive moth, but at a slower rate, down 2.9 percentage points. A reading above 50% indicates the non-manufacturing sector economy is generally expanding; below 50 indicates the non-manufacturing sector is generally contracting.

Despite the current economy, the diversity of the non-manufacturing sector has somewhat protected it. Nieves compared it to a diverse financial portfolio, showing overall less impact with many different industries represented.

As for the future, Nieves said all forecasts indicate sluggish GDP growth in 2009 and a reduction in inflation.

The poor financial sector has impacted other industries, he said, including construction, where new projects and developments may have been delayed due to lack of financing. The impact of the potential bailout of Wall Street is also uncertain.

“It’s this whole vicious cycle where there’s a cutback on spending,” Nieves said. “Hopefully with this package, it might loosen the reigns on things and hopefully we’ll start seeing more activity.”

“Next month, we might see more of the same,” he continued, predicting only slight growth.

Earlier in the week, the manufacturing index hit its lowest level in seven years, at 43.5%. But non-manufacturing industries are often not directly affected by the cost of raw materials or other supply chain issues like manufacturing industries are

Ten industries reported growth in September, including:

• Other services
• Mining
• Educational services
• Agriculture, forestry, fishing and hunting
• Utilities
• Retail trade
• Construction
• Health care and social assistance
• Transportation and warehousing
• Information

Those reporting contraction included arts, entertainment and recreation; real estate, rental and leasing; accommodation and food service; public administration; finance and insurance; management of companies and support services; wholesale trade and professional, scientific and technical services.