Non-manufacturing shows decent growth in October, reports ISM

Non-manufacturing activity continued to show solid growth in October, according to the Institute for Supply Management’s (ISM) Non-Manufacturing Report on Business. The ISM’s index to measure growth—the NMI—inched up 1.0 percent to 55.4 in October.

By ·

Non-manufacturing activity continued to show solid growth in October, according to the Institute for Supply Management’s (ISM) Non-Manufacturing Report on Business.

The ISM’s index to measure growth—the NMI—inched up 1.0 percent to 55.4 in October. A reading above 50 represents growth. ISM said that economic activity in the non-manufacturing sector grew in September for the 46th consecutive month.

Of the four key metrics in the report, including the NMI, three grew in October, with Business Activity/Production up 4.6 percent to 59.7 and Employment up 3.5 percent to 56.2. New Orders dipped 2.8 percent to 56.8. Even with the decline in October, New Orders have grown for 51 consecutive months, the report noted.

“The report looks very good overall, with the NMI up slightly compared to the 12-month average of 55.0,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “Part of the reason for that is business activity being up 4.6 percent. Even though New Orders were down, it was over 60 in August and it is still in a good place. Employment was also strong and is also a driver for October’s gains.”

The majority of ISM member respondent comments in the report were generally positive, with the government shutdown in October having, in some cases, what Nieves described as a psychological impact that did not truly show up in the report’s numbers.

Nieves said that October’s numbers are positive and provide a certain amount of confidence heading into the fourth quarter compared to a year ago at this time.

“There is still a degree of uncertainty there but not to the same extent,” he said. “Most of the uncertainty seems to lie around what the government is going to be doing in regards to healthcare reform and the overall fiscal policy. But it appears to be more solid than what we saw last year.”

Inventories in October were flat from September at 54.5, which Nieves said is in line with the non-manufacturing sector keeping a watchful eye on inventories and not wanting to be caught with too much extra stock.

“That is the prevailing practice for the sector as it is more of a demand-pull environment and less reliant on inventories having to deal with cycle times like in manufacturing,” he explained. “I don’t look at it as being anything other than inventory burn off or a concerted effort to really reduce inventory levels and not keeping it tied up on shelves which is not cost efficient. The inventory sentiment, which is indigenous to this report, is still not too high when you compare it to current business levels.”

Supplier Deliveries and Backlog of Orders were down 1.0 percent and 0.5 percent, respectively, at 49.0 and 50.0.

On a year-to-date basis through October, Nieves said non-manufacturing has been on a path of slow incremental growth that appears to be stable at this point in time.

What’s more, he said things are currently trending better for the sector than previously forecasted in the ISM’s most recent semiannual report from April.

“We have seen an uptick in revenue and will have a better idea when the December numbers come out, but we had such a small projection of business levels coming out of that forecast,” he said. “All indications when you look at strong New Orders and Business Activity will be interesting to keep an eye on.”


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
Mobile Solutions: Improving Supply Chain Efficiencies
To meet customer's ever-increasing service expectations and improve their business efficiency, companies are looking to their supply chain operations – especially material handling and warehouse operations managers.
Download Today!
From the February 2017 Modern Materials Handling Issue
In warehouses and DCs, planning solutions tend to take a back seat to execution system functions. Vendors are working to boost the trust factor using tools that break down forecasts and blend with analytics.
Automated Storage on the Move
Receiving 101: Setting the Table for Success
View More From this Issue
Subscribe to Our Email Newsletter
Sign up today to receive our FREE, weekly email newsletter!
Latest Webcast
2016 Warehouse/DC Operations Webcast: Confronting omni-channel complexity
During this webcast we’ll examine the current activities, trends, and best practices in warehouse and DC operations management and how companies plan to address complex issues associate with omni-channel fulfillment.
Register Today!
EDITORS' PICKS
Johnson & Johnson: A vision for automation
J&J Vision Care brings together a variety of automated technologies, including an innovative...
Using AGVs at LEDVANCE
The lighting manufacturer reaped savings by reducing maintenance costs and product damage, and using...

System Report: Sustainable Distribution at REI
Specialty outdoor retailer REI’s new distribution center brings together the next generation of...
System Report: Whirlpool puts mobile robots to work
In Whirlpool Corp.’s Clyde, Ohio, factory, mobile robots have automated the delivery of parts to...