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ISM non-manufacturing data for November remains in growth mode

By Jeff Berman, Group News Editor
December 05, 2012

While its companion index on the manufacturing side fell for the fourth time in the last six months in November, the Institute for Supply Management (ISM) reported today that things were better on the non-manufacturing side.

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 54.7 percent in November, up 0.5 percent from October and slightly ahead of the 12-month average of 54.4. A reading above 50 represents growth. With the November NMI remaining above 50, economic activity in the non-manufacturing sector has grown for the last 35 months, according to ISM. The PMI, the index on which the ISM’s Manufacturing Report on Business is based on, dropped 2.2 percent to 49.5 in November, following two months of growth in September and October, which were preceded by declines from June through August.

The report’s four core metrics were mostly up on a sequential basis in November. Business Activity/Production was down 5.8 percent at 61.2, and New Orders were up 3.3 percent at 58.1, and Employment was down 4.6 percent at 50.3.

“The growth in the PMI is being maintained by the strong performance in Business Activity, and New Orders,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “What is pulling it down a bit and would be reflected in a higher number is Supplier Deliveries being down 2.5 percent at 49.0. Employment is right on the cusp, too.”

In terms of what is needed to drive the Employment figure up, there are a few things to consider, based on feedback from ISM survey respondents featured in the report. These things include cautious optimism and economic uncertainty, global markets, the political climate, and economics in general, he said, explaining they are drivers and factors in the Employment figure topping 50 on a consistent basis.

What’s more, he said non-manufacturing is akin to having a diverse stock portfolio, he said, and does not have as much of an immediate impact on the overall economy as does a more myopic sector such as manufacturing.

“That is why you see manufacturing typically lead the economy into a downturn and leads it coming out,” Nieves said.

When asked what the “stars” of the month were for the November NMI, Nieves did not hesitate to point to Business Activity/Production being up 5.8 percent, which he said was unanticipated.

The same went for the 3.3 percent gain in New Orders to 58.1, he noted. 

“If we start to see these two metrics consistently head over 60, then Employment has to come up,” he said. “It is likely to rise in December on a seasonal basis and also because of increased retail activity.”

On the inventory front, November Inventories were up 0.5 percent to 47.0. Given that inventory management for non-manufacturing is typically demand-pull and hand-to-mouth driven, Nieves explained that inventories in the NMI are typically viewed as high due to things like just-in-time supply chain management.

And what has been occurring, he said, is a strong effort made towards burning off inventory, and maintaining cash flow, which is reflected in delivery speed.

“These things are all inter-related,” said Nieves.

November non-manufacturing imports rose 6 percent to 55.5, and exports were up 0.5 percent to 48.0. Imports, said Nieves, directly correspond with the strong output in Business Activity/Production, as the U.S. economy imports more goods than it exports.

About the Author

image
Jeff Berman
Group News Editor

Jeff Berman is Group News Editor for Logistics Management, Modern Materials Handling, and Supply Chain Management Review. Jeff joined the Supply Chain Group in 2005 and leads online and print news operations for these publications. In 2009, Jeff led Logistics Management to the Silver Medal of Folio’s Eddie Awards in the Best B2B Transportation/Travel Website category. 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. If you want to contact Jeff with a news tip or idea,
please send an e-mail to .(JavaScript must be enabled to view this email address).


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Article Topics

News · ISM · NMI · All topics

About the Author

Jeff Berman, 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.


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