December ISM non-manufacturing data turns in solid performance

Gains in New Orders and Employment lead the way for a 1.4 percent sequential improvement.

By ·

The Institute for Supply Management (ISM) reported today that non-manufacturing sector economic activity showed growth for the 36th consecutive month.

In its monthly Non-Manufacturing Report on Business, the ISM reported that the index it uses to measure non-manufacturing growth—known as the NMI—was 56.1 percent in December, up 1.4 percent from November and slightly ahead of the 12-month average of 54.7. A reading above 50 represents growth. The PMI, the index on which the ISM’s Manufacturing Report on Business is based on, rose 1.2 percent to 50.7 in December, marking the third time it has been up in the past seven months.

The report’s four core metrics were mostly up on a sequential basis in December. Business Activity/Production was down 0.9 percent at 60.3, and New Orders were up 1.2 percent at 59.3, and Employment was up 6.0 percent at 56.3.

“When you look at the report overall, it is surprising that we saw [gains] in New Orders from where it was in November, as well as on the Employment side,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “That has really driven the NMI, even with Business Activity still strong although it slipped a little bit, but its rate of growth is still over 60 which is fast.”

Supplier Deliveries in December were down 0.5 percent to 48.5. Nieves pointed out that the NMI could have possibly been in the 60s had the rate of Supplier Deliveries not been as fast as they were.

The reason for the fast pace of supplier deliveries, he said, had to do with the fact that companies were working off of existing inventories, with little backlog in the system.

“If it stays on this pace something has to give and there has to be an inventory buildup as well as a slowing in deliveries, because the capacity will not be there,” he said.

December Inventories were up 3.0 percent at 50.0. Nieves said an inventory buildup is not occurring just yet or it may be a case of inventory levels being built up for the holiday season and subsequently depleted.

Looking at the Employment index being up 6.0 percent in December, Nieves said that growth rate may not be sustainable as that number tends to dip early in the New Year, with any uptick leveling off in February and March providing a truer picture of the direction and strength of the indices, adding that the end of the first quarter will provide a clearer outlook.

Going ahead, how things play out in January is pivotal because if there is a continued uptick in the data from December’s strong performance it could pave the way for a strong year, said Nieves.

And that was echoed in feedback from ISM survey respondents featured in the report. Respondents said that business conditions were picking up despite the current economic state and federal budget issues, and business picking up in the fourth quarter, among other factors.

December Exports and Imports were up 1.5 percent and down 6.5 percent, respectively. The slowdown in imports points to the unhealthiness of global markets at the moment, said Nieves.

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 Modern Materials Handling Magazine!

Subscribe today. It's FREE!
Find out what the world’s most innovative companies are doing to improve productivity in their plants and distribution centers.
Start your FREE subscription today!

Article Topics

ISM · NMI · · All Topics
Latest Whitepaper
Hydrogen, the Future of Materials Handling
Large, successful organizations are integrating hydrogen fuel cell technology into their lift truck fleets and benefiting from lower operational costs, reduced emissions and improved reliability.
Download Today!
From the October 2016 Issue
Brownells’ new Iowa distribution center has taken touches—and miles—out of the order fulfillment process and increased throughput with near 100% accuracy.
System Report: Brownells new DC is flexible and responsive
Pallet Usage Report: Pallets Remain Critical in the Modern-Day Warehouse
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Pallets: Supporting Product, Processes and the Enterprise
The smallest leak in performance or cost can bring a lean, nimble and speedy supply chain to a halt. During this 30-minute webcast we'll examine how Modern's readers use pallets to keep the wheels turning as they maneuver a road filled with sharp edges and potholes.
Register Today!
Brownells: Designing for Efficiency and Growth
Brownells’ new Iowa distribution center has taken touches—and miles—out of the order...
Industry celebrates National Manufacturing Day
Fourth annual Manufacturing Day is a grassroots effort by U.S. manufacturers to improve the public...

American Eagle Outfitters’ omni-channel journey
The fashion retailer has used warehouse execution software and automation to create a true...
The data-driven lift truck
Now that manufacturers and distributors are using the data from their automated systems to drive...