A detailed deeper evaluation of the actual status of the US economy

A detailed deeper evaluation of the actual status of the US economy

US economic activity in the non-manufacturing sector grew in May for the 76th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM(®) Report On Business(®).

The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management(® )(ISM(®)) Non-Manufacturing Business Survey Committee. “The NMI(®) registered 52.9 % in May, 2.8 percentage points lower than the April reading of 55.7 %. This represents continued growth in the non-manufacturing sector at a slower rate. The Non-Manufacturing Business Activity Index decreased to 55.1%, 3.7 percentage points lower than the April reading of 58.8 %, reflecting growth for the 82nd consecutive month, at a slower rate in May. The New Orders Index registered 54.2 %, 5.7 percentage points lower than the reading of 59.9 % in April. The Employment Index decreased 3.3 percentage points to 49.7 % from the April reading of 53 % and indicates contraction after two consecutive months of growth. The Prices Index increased 2.2 percentage points from the April reading of 53.4 % to 55.6 %, indicating prices increased in May for the second consecutive month. According to the NMI(®), 14 non-manufacturing industries reported growth in May. Respondents’ comments are mixed and vary by industry and company. Overall, the report reflects a cooling-off and slowing in momentum from the previous months of growth for the non-manufacturing sector.”

Industry Performance

The 14 non-manufacturing industries reporting growth in May — listed in order — are: Health Care & Social Assistance; Accommodation & Food Services; Utilities; Wholesale Trade; Agriculture, Forestry, Fishing & Hunting; Construction; Public Administration; Real Estate, Rental & Leasing; Management of Companies & Support Services; Information; Finance & Insurance; Retail Trade; Transportation & Warehousing; and Arts, Entertainment & Recreation. The four industries reporting contraction in

May are: Mining; Other Services; Educational Services; and Professional, Scientific & Technical Services.

What respondents are saying:

 

    – “Outlook remains strong, with steady pricing, strong demand, and new expansion in the pipeline.” (Accommodation & Food Services)

    – “Projects from the oil companies are becoming less and less. Budget problems for capital projects.” (Construction)

    – “There has been a general slowing-down from the momentum we saw last month.” (Professional, Scientific & Technical Services)

    – “Slower start to the second quarter.” (Arts, Entertainment & Recreation)

    – “Holding steady. No real increase, but expansion plans on for late Q3 or Q4 in preparation for 2017.” (Finance & Insurance)

    – “Continued growth in the sector.” (Transportation & Warehousing)

    –  “Pending labour concerns to replace an aging workforce of highly-skilled staff support positions.” (Educational Services)

    – “High pressure on cost reduction due to declining top line sales.” (Retail Trade)

    –  “Significant drop in shipments for the month. Estimate a decline of nine percent for the markets we serve. Overall retail traffic has slowed. Pricing has stabilized in the market.” (Wholesale Trade)

                                                              

May 2016 Non-manufacturing Index summaries

 

NMI(®)

In May, the NMI(®) registered 52.9 %, a decrease of 2.8 percentage points when compared to April’s reading of 55.7 %, indicating continued growth in the non-manufacturing sector for the 76th consecutive month. A reading above 50 % indicates the non-manufacturing sector economy is generally expanding; below 50 % indicates the non-manufacturing sector is generally contracting.

 

An NMI(® )above 48.9 %, over a period of time, generally indicates an expansion of the overall economy. Therefore, the May NMI(®) indicates growth for the 82nd consecutive month in the overall economy, and indicates expansion in the non-manufacturing sector for the 76th consecutive month. Nieves stated, “The past relationship between the NMI(®) and the overall economy indicates that the NMI(®) for May (52.9 %) corresponds to a 1.6 % increase in real gross domestic product (GDP) on an annualized basis.”

 

NMI(®) HISTORY

 

 

 

             Month     NMI(R)                   Month NMI(R)

             —–      —–                   —–  —–

 

    May 2016                   52.9    Nov 2015              56.6

    ——–                   —-    ——–              —-

 

    Apr 2016                   55.7    Oct 2015              58.3

    ——–                   —-    ——–              —-

 

    Mar 2016                 54.5    Sep 2015              56.7

    ——–                   —-    ——–              —-

 

    Feb 2016                 53.4    Aug 2015              58.3

    ——–                   —-    ——–              —-

 

    Jan 2016                   53.5    Jul 2015                59.6

    ——–                   —-    ——–              —-

 

    Dec 2015                 55.8     Jun 2015             56.2

    ——–                   —-    ——–              —-

 

                   Average for 12 months – 56.0

 

                            High – 59.6

 

                            Low – 52.9

                            ———-

 

Business Activity

ISM(®)’s Business Activity Index in May registered 55.1 percent, a decrease of 3.7 percentage points from April’s reading of 58.8 percent. This represents growth in business activity for the 82nd consecutive month. Eleven industries reported increased business activity and four industries reported decreased activity for the month of May. Comments from respondents include: “Slower retail sales” and “Increased capital improvement programs activity.”

 

The 11 industries reporting growth of business activity in May — listed in order — are: Health Care & Social Assistance; Utilities; Finance & Insurance; Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Accommodation & Food Services; Public Administration; Retail Trade; Wholesale Trade; Transportation & Warehousing; and Information. The four industries reporting a decrease in business activity in May are: Mining; Other Services; Arts, Entertainment & Recreation; and Professional, Scientific & Technical Services.

 

 

    Business Activity    %Higher    %Same    %Lower        Index

 

    May 2016                    33             49           18               55.1

 

    Apr 2016                     37             52           11               58.8

 

    Mar 2016                    36             52           12               59.8

 

    Feb 2016                     31             51           18              57.8

 

New Orders

ISM(®)’s Non-Manufacturing New Orders Index registered 54.2 percent, a decrease of 5.7 percentage points from the April reading of 59.9 percent. May represents growth in new orders for the 82nd consecutive month and at a much slower rate compared to April. Comments from respondents include: “Awarded projects from earlier in the year” and “Adding programs and expansion.”

 

The 11 industries reporting growth of new orders in May — listed in order — are: Health Care & Social Assistance; Utilities; Wholesale Trade; Construction; Public Administration; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Transportation & Warehousing; Finance & Insurance; Management of Companies & Support Services; and Retail Trade. The three industries reporting contraction of new orders in May are: Mining; Other Services; and Professional, Scientific & Technical Services.

 

 

    New Orders    %Higher    %Same    %Lower        Index

 

    May 2016           31               52            17            54.2

 

    Apr 2016            36               53            11            59.9

 

    Mar 2016           31               55            14            56.7

 

    Feb 2016           29                52            19           55.5

 

Employment

Employment activity in the non-manufacturing sector contracted in May after two consecutive months of growth. ISM(®)’s Non-Manufacturing Employment Index registered 49.7 percent, which reflects a decrease of 3.3 percentage points when compared to April’s reading of 53 percent. Eleven industries reported increased employment, and six industries reported decreased employment. Comments from respondents include: “Company continues to ramp-down full time employees” and “Some people left and were not back-filled. Attrition.”

 

The 11 industries reporting an increase in employment in May — listed in order — are: Construction; Health Care & Social Assistance; Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Accommodation & Food Services; Wholesale Trade; Transportation & Warehousing; Management of Companies & Support Services; Public Administration; Information; and Retail Trade. The six industries reporting a reduction in employment in May – listed in order – are: Educational Services; Other Services; Mining; Utilities; Professional, Scientific & Technical Services; and Finance & Insurance.

 

 

    Employment   %Higher    %Same    %Lower         Index

 

    May 2016             22             60            18             49.7

 

    Apr 2016              25             62            13             53.0

 

    Mar 2016             19             67            14             50.3

 

    Feb 2016              19            63             18            49.7

 

Supplier Deliveries

Supplier deliveries were slower in May for the fifth consecutive month. The index registered 52.5 percent, which is 1.5 percentage points higher than the 51 percent that was registered in April. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: “Trucking issues” and “Factory backlogs continue to build. Few suppliers adding capacity at this time.”

 

The nine industries reporting slower deliveries in May — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Utilities; Information; Accommodation & Food Services; Wholesale Trade; Construction; Professional, Scientific & Technical Services; and Public Administration. The two industries reporting faster deliveries in May are: Transportation & Warehousing; and Finance & Insurance. Seven industries reported no change in supplier deliveries in May compared to April.

 

 

    Supplier Deliveries     %Slower   %Same    %Faster        Index

 

    May 2016                         8               89             3             52.5

 

    Apr 2016                          9               84             7             51.0

 

    Mar 2016                        6                90            4               51.0

 

    Feb 2016                        7                87             6              50.5

 

Inventories

ISM(®)’s Non-Manufacturing inventories grew for the 14th consecutive month and registered 54 percent in May, which is the same percent that was reported in April. Of the total respondents in May, 30 percent indicated they do not have inventories, or do not measure them. Comments from respondents include: “The increase in sales activity has lowered available stock” and “Sales are below expectations.”

 

The eight industries reporting an increase in inventories in May — listed in order — are: Utilities; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Professional, Scientific & Technical Services; Public Administration; Accommodation & Food Services; Wholesale Trade; and Retail Trade. The four industries reporting decreases in inventories in May are: Educational Services; Other Services; Health Care & Social Assistance; and Information. Six industries reported no change in inventories in May compared to April.

 

    Inventories      %Higher    %Same    %Lower        Index

 

    May 2016              23              62           15            54.0

 

    Apr 2016               21              66           13            54.0

 

    Mar 2016              21             63            16            52.5

 

    Feb 2016               23             59           18             52.5

 

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in May for the second consecutive month. ISM(®)’s Non-Manufacturing Prices Index for May registered 55.6 %, 2.2 percentage points higher than the 53.4 % reported in April. The proportion of respondents reporting higher prices is 24 %, 69 % indicated no change in prices paid, and 7 % of the respondents reported lower prices.

 

The nine non-manufacturing industries reporting an increase in prices paid during the month of May — listed in order — are: Utilities; Wholesale Trade; Construction; Health Care & Social Assistance; Finance & Insurance; Professional, Scientific & Technical Services; Public Administration; Retail Trade; and Transportation & Warehousing. The four industries reporting a decrease in prices paid for the month of May are: Mining; Management of Companies & Support Services; Information; and Agriculture, Forestry, Fishing & Hunting.

 

 

 

    Prices              %Higher    %Same    %Lower    Index

 

    May 2016          24               69            7            55.6

 

    Apr 2016            19              74            7            53.4

 

    Mar 2016           14              77            9             49.1

 

    Feb 2016            10             73            17           45.5

 

NOTE: Commodities reported as up in price and down in price are listed in the commodities section of the report.

 

Backlog of Orders

ISM(®)’s Non-Manufacturing Backlog of Orders Index indicates order backlogs were unchanged in May. The index registered 50 %, which is 1.5 percentage points lower than the 51.5 % reported in April. Of the total respondents in May, 37 % indicated they do not measure backlog of orders.

 

The five industries reporting an increase in order backlogs in May are: Utilities; Arts, Entertainment & Recreation; Information; Construction; and Public Administration. The seven industries reporting a decrease in order backlogs in May — listed in order — are: Mining; Other Services; Health Care & Social Assistance; Management of Companies & Support Services; Professional, Scientific & Technical Services; Wholesale Trade; and Retail Trade.

 

    Backlog of Orders   %Higher    %Same    %Lower        Index

 

    May 2016                     15             70             15            50.0

 

    Apr 2016                      18              67             15           51.5

 

    Mar 2016                     18             68              14           52.0

 

    Feb 2016                      18             68              14          52.0

 

New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically based personnel contracted in May for the second time in the last five months. The New Export Orders Index for May registered 49 %, which is 7.5 percentage points lower than the 56.5 % reported in April. Of the total respondents in May, 69 % indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

 

The four industries reporting an increase in new export orders in May are: Health Care & Social Assistance; Construction; Information; and Retail Trade. The five industries reporting a decrease in new export orders in May are: Arts, Entertainment & Recreation; Finance & Insurance; Mining; Wholesale Trade; and Professional, Scientific & Technical Services. Seven industries reported no change in new export orders in May compared to April.

 

 

 

    New Export Orders   %Higher    %Same    %Lower         Index

 

    May 2016                       8                 82             10           49.0

 

    Apr 2016                      16                 81               3           56.5

 

    Mar 2016                     21                75                4           58.5

 

    Feb 2016                     19                69               12          53.5

 

Imports

Imports of raw materials grew in May for the fourth consecutive month. This month’s reading at 53.5 % is 0.5 percentage point lower than the reading of 54 % reported in April. Fifty-eight percent of respondents reported that they do not use, or do not track the use of, imported materials.

 

The four industries reporting an increase in imports for the month of May are: Health Care & Social Assistance; Wholesale Trade; Accommodation & Food Services; and Construction. The only industry reporting a decrease in imports for the month of May is Public Administration. Twelve industries reported no change in imports in May compared to April.

 

 

    Imports   %Higher    %Same    %Lower      Index

 

    May 2016   &n


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