December 4, 2017

A Note About Last Month’s October 2017 ISM Non-Manufacturing Index: It Reached a Record High

Filed under: Economy — Tom @ 2:32 pm

I didn’t look at the October ISM Non-Manufacturing Index in full detail last month because of medical issues, but I did today while preparing for tomorrow’s report on November. I then realized I missed something pretty important.

The October report is worthy of full reproduction, and readers will see why shortly (bolds and most paragraph breaks added by me):

Economic activity in the non-manufacturing sector grew in October for the 94th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The NMI® registered 60.1 percent, which is 0.3 percentage point higher than the September reading of 59.8 percent. This represents continued growth in the non-manufacturing sector at a slightly faster rate. This is the highest NMI® reading since the index’s debut in 2008. The highest reading among pre-2008 composite index calculations is 61.3 percent in August 2005.

The Non-Manufacturing Business Activity Index increased to 62.2 percent, 0.9 percentage point higher than the September reading of 61.3 percent, reflecting growth for the 99th consecutive month, at a slightly faster rate in October. The New Orders Index registered 62.8 percent, 0.2 percentage point lower than the reading of 63 percent in September.

The Employment Index increased 0.7 percentage point in October to 57.5 percent from the September reading of 56.8 percent. The Prices Index decreased by 3.6 percentage points from the September reading of 66.3 percent to 62.7 percent, indicating prices increased in October for the fifth consecutive month.

According to the NMI®, 16 non-manufacturing industries reported growth. The non-manufacturing sector has reflected the third consecutive month of strong growth. Respondent comments continue to indicate a positive outlook for business conditions, and the economy as we begin the fourth quarter.”

The 16 non-manufacturing industries reporting growth in October — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Construction; Transportation & Warehousing; Mining; Real Estate, Rental & Leasing; Utilities; Other Services; Wholesale Trade; Management of Companies & Support Services; Retail Trade; Finance & Insurance; Health Care & Social Assistance; Public Administration; Information; Professional, Scientific & Technical Services; and Accommodation & Food Services. The two industries reporting contraction in October are: Educational Services; and Arts, Entertainment & Recreation.

That’s right the ISM Non-Manufacturing Index reached a record level (since 2008, when the old “services” report got reworked).

The Associated Press treated it as a 12-year record, failing to recognize that comparing the new and old indices is an apples-and-oranges exercise. (We also need to chill the euphoria a bit and remember that ISM produces surveys, not hard data.)

The combination of that news and October’s Manufacturing Index of 58.7 percent was probably the highest combination of the two reports in a very, very long time.

November’s Manufacturing Index dipped a bit to 58.2 percent from the 58.7 percent seen in October. But if Non-Manufacturing somewhat manages another increase, we’ll see another virtual all-time high in the weighted index (about 85 percent Non-Manufacturing and 15 percent Manufacturing).


1 Comment

  1. [...] noted yesterday, there’s a bit of drama here, as a rise in this index from October’s 60.1 percent would [...]

    Pingback by BizzyBlog — December 5, 2017 @ 10:01 am

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