ISM Non-Manufacturing: Slower, But Continued Growth In April

The Institute of Supply Management (ISM) has now released the April Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 55.5 percent, down 0.6 from 56.1 last month. Today's number came in below the Investing.com forecast of 57.2 percent.

Here is the report summary:

“The NMI® registered 55.5 percent, which is 0.6 percentage point lower than the March reading of 56.1 percent. This represents continued growth in the non-manufacturing sector, at a slightly slower rate. The Non-Manufacturing Business Activity Index increased to 59.5 percent, 2.1 percentage points higher than the March reading of 57.4 percent, reflecting growth for the 117th consecutive month, at a faster rate in April. The New Orders Index registered 58.1 percent; 0.9 percentage point lower than the reading of 59 percent in March. The Employment Index decreased 2.2 percentage points in April to 53.7 percent from the March reading of 55.9 percent. The Prices Index decreased 3 percentage points from the March reading of 58.7 percent to 55.7 percent, indicating that prices increased in April for the 23rd consecutive month. According to the NMI®, 15 non-manufacturing industries reported growth. The non-manufacturing sector has experienced an uptick in business activity, but in general, there has been a leveling off. Respondents are still mostly optimistic about overall business conditions, but concerns remain about employment resources.” [Source]

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 the Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.

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The more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point at 59.5 percent is up 2.1 from a seasonally adjusted 57.4 the previous month.

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For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualize the short-term trends.

Theoretically, this indicator should become more useful as the time frame 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.

Here is a table showing the trend in the underlying components.

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