The non-manufacturing ISM surveys nearly 400 firms from 60 sectors across the United States, including agriculture, mining, construction, transportation, communications, wholesale trade and retail trade. Financial market players monitor the business activity index, because a composite index, like its manufacturing cousin, is not compiled by the ISM. Why Investors Care
| Released on 2/5/07 For Jan 2007 | ||||||||||||
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Highlights
In a surprise, the Institute For Supply Management's non-manufacturing index shot up in January to 59.0 vs. 56.7 in December. But sub-indexes weren't that strong as new orders showed no new life (55.4 vs. 55.6) and backlogs continued to contract (49.0 vs. 48.0). Employment was also soft at 51.7 vs. 53.2.
The data do show a sharp contraction in inventories, though not quite as sharp as the dramatic contraction in last week's ISM report on the manufacturing side. Non-manufacturing inventories fell to 47.0 from 53.5, suggesting that slow growth in new orders and especially the drawdown in backlogs are making supply managers a little nervous. Inventory building isn't likely to add to first quarter growth. Other readings included a sharp slowing in export orders, which is not a large source of business for non-manufacturers, and an easing in price pressures.
There was little initial reaction to the report in the financial markets. It will be interesting to see how data unfolds through the month with early indications, led by last week's solid employment report, pointing to solid growth. Yet last week's ISM report does raise important questions about manufacturing data.
The business activity index from the ISM non-manufacturing survey remained healthy in December but eased slightly to 57.1 from 58.9 in November. But orders data in that report suggests a slowing in business activity growth. New orders dipped 2.7 percentage points to a still respectable 54.4 while backlog orders plunged 6.5 points to 48.0.
Business activity index Consensus Forecast for January 07: 57.0
Range: 53.5 to 58.0
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The ISM non-manufacturing survey does not compile a composite index like its manufacturing cousin. The business activity index, which is actually akin to the production index in the manufacturing survey, is widely followed as the key figure from this survey. |
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