Can’t Blame the Shutdown For This: ISM Non Manufacturing Index Plunges to 54.4% from 58.6%, But Is Still Quite Positive
What the Insitute for Supply Management’s Manufacturing Index giveth, the Non Manufacturing Index has taken away — and then some, bigtime:
Economic activity in the non-manufacturing sector grew in September for the 45th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business®.
“The NMI™ registered 54.4 percent in September, 4.2 percentage points lower than August’s reading of 58.6 percent. This indicates continued growth at a slower rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased to 55.1 percent, which is 7.1 percentage points lower than the 62.2 percent reported in August, reflecting growth for the 50th consecutive month but at a significantly slower rate. The New Orders Index decreased by 0.9 percentage point to 59.6 percent, and the Employment Index decreased 4.3 percentage points to 52.7 percent, indicating growth in employment for the 14th consecutive month. The Prices Index increased 3.8 percentage points to 57.2 percent, indicating prices increased at a faster rate in September when compared to August. According to the NMI™, 11 non-manufacturing industries reported growth in September. The majority of the respondents’ comments continue to be positive; however, there is an increase in the degree of uncertainty regarding the future business climate and the direction of the economy.”
This isn’t a problem unless it repeats itself next month. Then it’s a really big problem.
The “right now” indicator of Business Activity’s plunge is the most troubling and has the greatest potential to negatively affect GDP. The two orders-related figures (New Orders and Backlog) basically held steady. The New Orders number is so strong I don’t think the fact that Backlong was still just above the expansion/contraction breakeven point of 50% for the second straight month is particularly worrisome.
The comments are mostly lukewarm to downbeat. Here’s a particularly interesting one:
“The federal government’s spending is increasing greatly as agencies execute their final budgets and utilize fiscal year 2013 appropriated funds prior to their expiration on September 30th. This has caused a major increase in procurement activity for goods and services. Budgets are uncertain for fiscal year 2014, so some items requiring funding in future years are not being purchased.” (Public Administration)
That would appear to point to potential for October weakness, and of course means that the supposedly brutal sequestration constraints aren’t stopping federal bureaucrats from engaging in their normal fiscal year-end spending binges.