ISM Non-Manufacturing: January Growth Continues At Slower Rate
Jill Mislinski: Today the Institute for Supply Management published its latest Non-Manufacturing Report. The headline NMI Composite Index is at 53.3 percent, down 2.5 percent from last month’s seasonally adjusted 55.8 percent. Today’s number came in above the Investing.com forecast of 55.1 percent.
Here is the report summary:
“The NMI® registered 53.5 percent in January, 2.3 percentage points lower than the seasonally adjusted December reading of 55.8 percent. This represents continued growth in the non-manufacturing sector at a slower rate. The Non-Manufacturing Business Activity Index decreased to 53.9 percent, which is 5.6 percentage points lower than the seasonally adjusted December reading of 59.5 percent, reflecting growth for the 78th consecutive month at a slower rate. The New Orders Index registered 56.5 percent, 2.4 percentage points lower than the seasonally adjusted reading of 58.9 percent in December. The Employment Index decreased 4.2 percentage points to 52.1 percent from the seasonally adjusted December reading of 56.3 percent and indicates growth for the 23rd consecutive month. The Prices Index decreased 4.6 percentage points from the seasonally adjusted December reading of 51 percent to 46.4 percent, indicating prices decreased in January for the third time in the last five months. According to the NMI®, 10 non-manufacturing industries reported growth in January. The majority of the respondents’ comments are positive about business conditions; however, there is a concern that exists relative to global conditions, stock market volatility, and the effect on commercial and consumer confidence.”
Unlike its much older kin, the ISM Manufacturing Series, there is relatively little history for ISM’s Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.
The more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point at 53.9 percent is down from a seasonally adjusted 59.5 the previous month.
For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualizing the short-term trends.
Theoretically, this indicator should become more useful as the timeframe of its coverage expands. Manufacturing may be a more sensitive barometer than Non-Manufacturing activity, but we are increasingly a services-oriented economy, which explains our intention to keep this series on the radar.