ISM Non-Manufacturing: Slower Growth In November

The Institute of Supply Management (ISM) has now released the November Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 53.9 percent, down 0.8 from 54.7 last month. Today's number came in below the Investing.com forecast of 54.5 percent.

Here is the report summary:

“The NMI® registered 53.9 percent, which is 0.8 percentage points lower than the October reading of 54.7 percent. This represents continued growth in the non-manufacturing sector, at a slightly slower rate. The Non-Manufacturing Business Activity Index decreased to 51.6 percent, 5.4 percentage points lower than the October reading of 57 percent, reflecting growth for the 124th consecutive month. The New Orders Index registered 57.1 percent; 1.5 percentage points higher than the reading of 55.6 percent in October. The Employment Index increased 1.8 percentage points in November to 55.5 percent from the October reading of 53.7 percent. The Prices Index increased 1.9 percentage points from the October reading of 56.6 percent to 58.5 percent, indicating that prices increased in November for the 30th consecutive month. According to the NMI®, 12 non-manufacturing industries reported growth. The non-manufacturing sector had a slight pullback in November. The respondents hope for a resolution on tariffs and continue to be hampered by constraints in labor 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.

The more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point at 51.6 percent is down 5.4 from a seasonally adjusted 57.0 the previous month.

ISM Non-Manufacturing

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*
NOVEMBER 2019

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.

Non-Manufacturing	Manufacturing
Index	Series Index Nov	Series Index Oct	Percent Point Change	Direction	Rate of Change	Trend** (Months)	Series Index Nov	Series Index Oct	Percent Point Change
NMI®/ PMI®	53.9	54.7	-0.8	Growing	Slower	118	48.1	48.3	-0.2
Business Activity/ Production	51.6	57.0	-5.4	Growing	Slower	124	49.1	46.2	+2.9
New Orders	57.1	55.6	+1.5	Growing	Faster	124	47.2	49.1	-1.9
Employment	55.5	53.7	+1.8	Growing	Faster	69	46.6	47.7	-1.1
Supplier Deliveries	51.5	52.5	-1.0	Slowing	Slower	6	52.0	49.5	+2.5
Inventories	50.5	50.5	0.0	Growing	Same	4	45.5	48.9	-3.4
Prices	58.5	56.6	+1.9	Increasing	Faster	30	46.7	45.5	+1.2
Backlog of Orders	48.5	48.5	0.0	Contracting	Same	2	43.0	44.1	-1.1
New Export Orders	52.0	50.0	+2.0	Growing	From Unchanged	1	47.9	50.4	-2.5
Imports	45.0	48.5	-3.5	Contracting	Faster	3	48.3	45.3	+3.0
Inventory Sentiment	58.5	57.0	+1.5	Too High	Faster	269	N/A	N/A	N/A
Customers' Inventories	N/A	N/A	N/A	N/A	N/A	N/A	45.0	47.8	-2.8
Overall Economy	Growing	Slower	124
Non-Manufacturing Sector	Growing	Slower	118