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
Is Your DC Ready for E-commerce Growth? Here’s How to Handle More SKUs and Inventory Turns
The rise of e-commerce and multi-channel fulfillment has caused distribution centers (DCs) to experience ever-growing numbers of stock-keeping units (SKUs) and more inventory turns, up to an average of nine in 2015.
Download Today!
From the August 2016 Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
5 Emerging Technologies Enabling Competitive Advantage for Distribution
Come hear about the latest in each-picking robotics, co-bots, artificial intelligence, autonomous vehicles, sensors, drones and droids that are enabling competitive advantage for distribution.
Register Today!
EDITORS' PICKS
The data-driven lift truck
Now that manufacturers and distributors are using the data from their automated systems to drive...
Destination Maternity: Destination Automation
Running short of space in its old facility, Destination Maternity Corp. built a new, highly...

Hibbett Sports: Faster, Flexible and Efficient
A high-speed conveyor and sortation system at Hibbett Sports’ Alabama distribution center speeds...
Necessity is the mother of invention at Quiet Logistics
Faced with the loss of a robotic pick solution, Quiet Logistics invented its own robots. Are they...