ISM says non-manufacturing activity in June is still seeing growth

Non-manufacturing activity took a dip in June but remained in growth territory, according to the June edition of the Institute of Supply Management’s (ISM) Non-Manufacturing Report on Business.

By ·

Non-manufacturing activity took a dip in June but remained in growth territory, according to the June edition of the Institute of Supply Management’s (ISM) Non-Manufacturing Report on Business.

ISM said that the index used to measure non-manufacturing growth—known as the NMI—was 52.2 in May, down 1.5 percent from May. June’s PMI is 2.2 percent below the 12-month average of 54.4. Non-manufacturing activity increased for the 42nd consecutive month in June, said ISM. 

A reading above 50 represents growth. Earlier this week, the ISM reported that the PMI, the index on which the ISM’s Manufacturing Report on Business is based on, increased 1.9 percent to 50.9 in June. This is below the 12-month average of 51.2.

Including the PMI, three of the report’s four key metrics were up in June. Business Activity/Production shrunk 4.8 percent increase to 51.7, and New Orders were down 5.2 percent at 50.8. Employment was the lone core metric showing growth, up 4.6 percent to 54.7.

“There is still growth here month-over-month, even though the rate slowed down,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “The decline in New Orders does not mean they are not growing; it just means the rate is slower.”

At the mid-year point, Nieves said non-manufacturing remains in a slow-growth, incremental phase, while Employment had room for improvement. But that could be changing as evidenced by today’s report from Reuters that the ADP National Employment Report said U.S. companies added 188,000 jobs in June, exceeding median forecast of 160,000 among economists polled by Reuters and was higher than a slightly downgraded 134,000 increase in May.

Nieves said type of job growth could translate into better things in the future, due to the fact that more people at work equates into increased consumer confidence, which can help to spur retail sales and other economic activity.

Business/Activity and Production’s reading of 51.7 was its lowest monthly reading since November 2009, when it was at 50.9.

“There was a decline, but this is a moving baseline,” said Nieves. “The decline in growth percentage is not reflective of the rate. It has more to do with speed and timing and not necessarily total output and volume if we were to compare it to something numerical, which is hard to due because of the fluctuation from month-to-month.”

June Inventories and Prices were up 3.0 percent and 1.4 percent, respectively.

Nieves said there was such a concentrated effort on reducing inventory for a longer period of time that when orders and business activity went up, the inventory was not there.

“Our respondents’ comments indicated they had to build up inventory, because they did not have the capacity to handle what was coming in,” he said. “That is why we are seeing deliveries slow down slightly and backlog has grown a little bit.

Prices were up for the 45th straight month, with Nieves explaining the gains have largely been driven by petroleum and oil-based products with little actual pricing power otherwise evident.


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

· 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...