The Institute of Supply Management (ISM) has now released the March Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 56.1 percent, down 3.6 from 59.7 last month. Today's number came in below the Investing.com forecast of 58.1 percent.
Here is the report summary:
“The NMI® registered 56.1 percent, which is 3.6 percentage points lower than the February reading of 59.7 percent. This represents continued growth in the non-manufacturing sector, at a slower rate. The Non-Manufacturing Business Activity Index decreased to 57.4 percent, 7.3 percentage points lower than the February reading of 64.7 percent, reflecting growth for the 116th consecutive month, at a slower rate in March. The New Orders Index registered 59 percent, 6.2 percentage points lower than the reading of 65.2 percent in February. The Employment Index increased 0.7 percentage point in March to 55.9 percent from the February reading of 55.2 percent. The Prices Index increased 4.3 percentage points from the February reading of 54.4 percent to 58.7 percent, indicating that prices increased in March for the 22nd consecutive month. According to the NMI®, 16 non-manufacturing industries reported growth. The non-manufacturing sector’s growth cooled off in March after strong growth in February. Respondents remain mostly optimistic about overall business conditions and the economy. They still have underlying concerns about employment resources and capacity constraints.” [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.
(Click on image to enlarge)
The more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point at 57.4 percent is down 7.3 from a seasonally adjusted 64.7 the previous month.
(Click on image to enlarge)
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.
ISM® NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM® NON-MANUFACTURING AND ISM®MANUFACTURING SURVEYS*
MARCH 2019
| Non-Manufacturing | Manufacturing | ||||||||
|---|---|---|---|---|---|---|---|---|---|
| Index | Series Index Mar | Series Index Feb | Percent Point Change | Direction | Rate of Change | Trend** (Months) | Series Index Mar | Series Index Feb | Percent Point Change |
| NMI®/ PMI® | 56.1 | 59.7 | -3.6 | Growing | Slower | 110 | 55.3 | 54.2 | +1.1 |
| Business Activity/ Production | 57.4 | 64.7 | -7.3 | Growing | Slower | 116 | 55.8 | 54.8 | +1.0 |
| New Orders | 59.0 | 65.2 | -6.2 | Growing | Slower | 116 | 57.4 | 55.5 | +1.9 |
| Employment | 55.9 | 55.2 | +0.7 | Growing | Faster | 61 | 57.5 | 52.3 | +5.2 |
| Supplier Deliveries | 52.0 | 53.5 | -1.5 | Slowing | Slower | 39 | 54.2 | 54.9 | -0.7 |
| Inventories | 50.0 | 51.0 | -1.0 | Unchanged | From Growing | 1 | 51.8 | 53.4 | -1.6 |
| Prices | 58.7 | 54.4 | +4.3 | Increasing | Faster | 22 | 54.3 | 49.4 | +4.9 |
| Backlog of Orders | 56.5 | 55.5 | +1.0 | Growing | Faster | 15 | 50.4 | 52.3 | -1.9 |
| New Export Orders | 52.5 | 55.0 | -2.5 | Growing | Slower | 26 | 51.7 | 52.8 | -1.1 |
| Imports | 51.5 | 48.5 | +3.0 | Growing | From Contracting | 1 | 51.1 | 55.3 | -4.2 |
| Inventory Sentiment | 62.5 | 59.0 | +3.5 | Too High | Faster | 261 | N/A | N/A | N/A |
| Customers' Inventories | N/A | N/A | N/A | N/A | N/A | N/A | 42.7 | 39.0 | +3.7 |
| Overall Economy | Growing | Slower | 116 | ||||||
| Non-Manufacturing Sector | Growing | Slower | 110 |
Non-Manufacturing ISM® Report On Business® data is seasonally adjusted for the Business Activity, New Orders, Prices and Employment Indexes. Manufacturing ISM® Report On Business®data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries Indexes.
*Number of months moving in current direction.
Here is a link to our coverage of the latest ISM Manufacturing report.
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