ISM non-manufacturing data shows growth in May

Despite a backdrop of negative jobs reports, sluggish home sales, and cautious consumer spending, the non-manufacturing sector remains in decent shape based on the results of the Institute for Supply Management’s (ISM) Non-Manufacturing Report on Business, which showed growth for the 18th consecutive month in May.

By ·

Despite a backdrop of negative jobs reports, sluggish home sales, and cautious consumer spending, the non-manufacturing sector remains in decent shape based on the results of the Institute for Supply Management’s (ISM) Non-Manufacturing Report on Business, which showed growth for the 18th consecutive month in May.

The ISM’s index for measuring the sector’s overall health—known as the NMI—was 54.6 in May, 1.8 percentage points higher than April’s 52.8.  A reading above 50 represents growth.

The NMI’s total reading is largely based on four core metrics. In May, three of the four were ahead of April’s levels, with Business Activity/Production down 0.1 percent at 53.6, New Orders up 4.1 percent at 56.8, and Employment up 2.1 percent to 54.0.

“I was pleasantly surprised when I saw the numbers come in, especially with the New Orders index” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “This report came in better than expectations, especially on the heels of the ISM manufacturing report last week [which declined]. What we are seeing here is that non-manufacturing is such an eclectic sector and even with retail off the strength of the rest of the sector pulled it along. And the employment picture is looking up again, too.”

And with the NMI over 50, May continues a sustained stretch of continuous growth at a slow and incremental pace.

With summer quickly approaching, Nieves said it will be interesting to see how the data trends out in the coming months, which tend to wane somewhat due to the seasonal components of which its data is based on.

When asked what the drivers were for new order growth in May, Nieves explained that fuel was not a factor, as prices were still on the rise prior to when this data was collected. But next month, declining fuel prices could be reflected in the ISM data. Prices were down 0.5 percent to 70.1 in May.

Going forward, Nieves said it is realistic to expect the NMI to be in the mid-50s over the next few months, possibly hitting the high 50s, with a chance of getting into the 60s closer to the fall.

On the employment side, Nieves said that employment in the non-manufacturing sector is seasonally-adjusted, adding that this data takes into account recent trends and timing of the year.

“For employment, we tend to see some slippage in the summer months as it relates to different indices,” said Nieves. “And some sectors like textiles shut down in the summer which factors into these numbers.”

While many economists lately are pointing to a so-called “soft patch” in the economy at the moment, Nieves said non-manufacturing is seeing more of a steady flow in growth and is not experiencing the spikes seen in other sectors like manufacturing, which began this year on a torrid growth path.


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!

Latest Whitepaper
The Overlooked Competitive Advantage: Connected Teams
57% of surveyed manufacturers believe they could reduce downtime by 10-30% by unifying their workgroup communications. What does a minute of downtime cost you?
Download Today!
From the January 2018 Modern Materials Handling Issue
PFS built one of the largest and most automated AS/RS freezers in the world in Washington state. Next up is a new design for automation. Automated Storage/ Automated Retrieval System, Cold Storage.
Lift Truck Series Part 1: Lift truck technology connects pickers to productivity
Breaking Through On Yard Visibility
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
Emerging Technologies for Your Distribution Center
Come get an insider's view of the latest technologies for inside your Distribution Center. You'll learn which technologies are being piloted, which are having success and moving from concept to implementation and into production on the maturity scale, and what's coming on the horizon.
Register Today!
EDITORS' PICKS
Trinchero Family Estates: Pallet handling in the vineyard
The second-largest family-owned wine company in the world turns to automated pallet handling and...
System Report: Rocky Brands Sees the Light
Confronting an aging materials handling system and new channels of business with new customer...

Top 20 industrial lift truck suppliers, 2017
The top lift truck suppliers list is changing with industry acquisitions causing a dramatic...
Lodge Manufacturing: Distribution Cast in Iron
In a new facility, iPhones and a new WMS allowed cookware manufacturer Lodge to double its business...