ISM reports solid month for non-manufacturing in April

The April edition of the Institute for Supply Management’s (ISM) edition of the Non-Manufacturing Report on Business picked up where March left off: in a good place.

The index ISM uses to measure non-manufacturing growth—known as the NMI—was 55.7 in April (a level of 50 or higher indicates growth), which was up 1.2 percent compared to March, with economic activity in the non-manufacturing sector growing for the 75th consecutive month. The April PMI is 0.5 percent above the 12-month average of 56.2.

Thirteen non-manufacturing sectors reported growth in February, including Information; Management of Companies & Support Services; Accommodation & Food Services; Wholesale Trade; Health Care & Social Assistance; Utilities; Finance & Insurance; Real Estate, Rental & Leasing; Construction; Agriculture, Forestry, Fishing & Hunting; Public Administration; Professional, Scientific & Technical Services; and Retail Trade.

And three of the report’s four key metrics, including the NMI, were up in April. New orders rose 3.2 percent to 59.9, with growth intact for the past 81 months, and employment saw a 2.7 percent gain to 53.0, showing growth for the second month in a row, with ten sectors reporting employment increases in April. Business Activity/Production was down 1.0 percent to 58.8, but was still showing growth for the 81st month in a row, with 15 sectors reporting growth in April.

“Even though the NMI was down, the decline was not steep and was still at a high level,” said Tony Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an interview. “It shows how consistent this sector has been performing over a long period of time. Even though business activity was down one point, new orders had a nice strong increase and employment bounced back, too. This all reflects the consistency in the non-manufacturing sector. That has been the case since around the third quarter of last year.”

April supplier deliveries were flat at 51.0, and inventories were up 1.5 percent at 54.0. Prices saw a 4.3 percent bounce to 53.4, and backlog of orders dropped 0.5 percent to 51.5.

Nieves said when looking at these metrics in terms of pricing collectively it speaks to fuel and fuel-related commodities raising prices. And he said current inventory levels are reasonable, given the ongoing gains in new orders.

“If we stay on this trend of growth, we will start to see deliveries slow and backlog increase,” he explained. “Right now, though, capacity utilization is not currently being impacted, but it could be down the road. We will have to wait and see. It will be interesting to see what happens.”