ISM Non-Manufacturing Survey Improves in January 2011

After seeing the improving ADP employment data on the service sector (analysis here), it should not be a surprise that the purchasing managers believe the service segment of the economy is expanding in January 2011.

The service segment of the economy employs 90% of private sector non-farm employees.  If employment is growing, it is hard to imagine this segment is not growing economically.  The headlines from the survey:

“The NMI (Non-Manufacturing Index) registered 59.4 percent in January, 2.3 percentage points higher than the seasonally adjusted 57.1 percent registered in December (the seasonal adjustment did not change the reading that was originally reported), and indicating continued growth in the non-manufacturing sector. The Non-Manufacturing Business Activity Index increased 1.7 percentage points to 64.6 percent, reflecting growth for the 18th consecutive month and at a faster rate than in December. The New Orders Index increased 3.5 percentage points to 64.9 percent, and the Employment Index increased 1.9 percentage points to 54.5 percent, indicating growth in employment for the fifth consecutive month and at a faster rate. The Prices Index increased 2.6 percentage points to 72.1 percent, indicating that prices increased at a faster rate in January. According to the NMI, 13 non-manufacturing industries reported growth in January. Respondents’ comments are mostly positive about business conditions; however, they still remain cautious about the sustainability.”


The 13 industries reporting growth in January based on the NMI composite index — listed in order — are: Mining; Real Estate, Rental & Leasing; Utilities; Transportation & Warehousing; Management of Companies & Support Services; Finance & Insurance; Information; Accommodation & Food Services; Wholesale Trade; Retail Trade; Construction; Other Services; and Health Care & Social Assistance. The five industries reporting contraction in January are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Educational Services; Professional, Scientific & Technical Services; and Public Administration.

  • “New initiatives creating increase in spending.” (Finance & Insurance)
  • “Indications are that business is picking up and that 2011 could see positive growth across many industries. We are seeing an increase in orders at the beginning of the year.” (Professional, Scientific & Technical Services)
  • “Starting to see higher prices in many areas. Low inventory levels are leading to longer delivery time frames.” (Public Administration)
  • “Business uncertainty seems to be subsiding.” (Management of Companies & Support Services)
  • “Business activity is picking up. The challenges in the textile market (cotton/polyester) are significantly impacting price along with the inability to secure pricing for a period longer than two months.” (Accommodation & Food Services)
  • “2011 looking better than 2010.” (Information)

The ISM Manufacturing survey was analyzed here by Econintersect.

As expected both new orders and backlog are growing.   An interesting one month movement is that new export orders were not as strong.

Remember this is a survey, and not hard data.

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