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FOR RELEASE: January 7, 2020

Contact:   Kristina Cahill
Report On Business® Analyst
ISM®, ROB/Research Manager
Tempe, Arizona
480-752-6276, Ext. 3015
E-mail: kcahill@instituteforsupplymanagement.org

 


December 2019 Non-Manufacturing ISM® Report On Business®

NMI® at 55%


GDP Growing at 2.2%


Business Activity Index at 57.2%

New Orders Index at 54.9%

Employment Index at 55.2%


(Tempe, Arizona) – Economic activity in the non-manufacturing sector grew in December for the 119th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: "The NMI® registered 55 percent, which is 1.1 percentage points higher than the November reading of 53.9 percent. This represents continued growth in the non-manufacturing sector, at a slightly faster rate. The Non-Manufacturing Business Activity Index rose to 57.2 percent, a 5.6-percentage point increase compared to the November reading of 51.6 percent, reflecting growth for the 125th consecutive month. The New Orders Index registered 54.9 percent, 2.2 percentage points lower than the reading of 57.1 percent in November. The Employment Index decreased 0.3 percentage point in December to 55.2 percent from the November reading of 55.5 percent. The Prices Index reading of 58.5 percent is the same as the November figure, indicating that prices increased in December for the 31st consecutive month. According to the NMI®, 11 non-manufacturing industries reported growth. The non-manufacturing sector had an uptick in growth in December. The respondents are positive about the potential resolution on tariffs. Capacity constraints have eased a bit; however, respondents continue to have difficulty with labor resources."

The 11 non-manufacturing industries reporting growth in December — listed in order — are: Retail Trade; Arts, Entertainment & Recreation; Management of Companies & Support Services; Health Care & Social Assistance; Utilities; Accommodation & Food Services; Information; Transportation & Warehousing; Professional, Scientific & Technical Services; Other Services; and Finance & Insurance. The six industries that reported a decrease in December — listed in order — are: Educational Services; Real Estate, Rental & Leasing; Wholesale Trade; Public Administration; Mining; and Construction.

What respondents are saying
  • "Growth remains steady. While late-year pricing-increase proposals were either flat or in the low single digits, most have been mitigated." (Accommodation & Food Services)
  • "Weather and the holiday season have had an impact on residential new construction sales and production. While demand is outstripping supply in the housing market, business is down due to global trade insecurity causing affordability, labor and cost pressures." (Construction)
  • "Supply [is] good. Holiday sales below plan." (Information)
  • "Business activity and growth in our business continues to expand." (Management of Companies & Support Services)
  • "Our company's production, sales and purchasing [activities] are back to normal. Maintenance, planned and otherwise, is driving the usual necessity for spare parts." (Mining)
  • "New prospects have improved this month, although continuing uncertainty is causing clients to delay confirmation." (Professional, Scientific & Technical Services)
  • "Budgets and business accelerating." (Public Administration)
  • "The shorter-than-normal holiday season tightens sales opportunities; however, initial trends have been favorable." (Retail Trade)
  • "We are seeing extended lead times for already purchased materials across the board. Suppliers, as well, are warning that they are seeing longer lead times for engineered and manufactured goods." (Utilities)
  • "Overall business is down from this time last year, but sales have increased over the last month, causing more buys with our suppliers." (Wholesale Trade)

ISM® NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM® NON-MANUFACTURING AND ISM® MANUFACTURING SURVEYS*
December 2019

 Non-ManufacturingManufacturing
IndexSeries Index DecSeries Index NovPercent Point ChangeDirectionRate of ChangeTrend** (Months)Series Index DecSeries Index NovPercent Point Change
NMI®/ PMI® 55.0 53.9 +1.1 Growing Faster 119 47.2 48.1 -0.9
Business Activity/ Production 57.2 51.6 +5.6 Growing Faster 125 43.2 49.1 -5.9
New Orders 54.9 57.1 -2.2 Growing Slower 125 46.8 47.2 -0.4
Employment 55.2 55.5 -0.3 Growing Slower 70 45.1 46.6 -1.5
Supplier Deliveries 52.5 51.5 +1.0 Slowing Faster 7 54.6 52.0 +2.6
Inventories 51.0 50.5 +0.5 Growing Faster 5 46.5 45.5 +1.0
Prices 58.5 58.5 0.0 Increasing Same 31 51.7 46.7 +5.0
Backlog of Orders 47.5 48.5 -1.0 Contracting Faster 3 43.3 43.0 +0.3
New Export Orders 51.0 52.0 -1.0 Growing Slower 2 47.3 47.9 -0.6
Imports 48.0 45.0 +3.0 Contracting Slower 4 48.8 48.3 +0.5
Inventory Sentiment 60.0 58.5 +1.5 Too High Faster 270 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 41.1 45.0 -3.9
Overall Economy Growing Faster 125
Non-Manufacturing Sector Growing Faster 119
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 *Number of months moving in current direction.

Commodities reported up/down in price and in short supply


Commodities Up in Price

Beef Products; Cheese Products (2); Fuel; and Oriented Strand Board.

 

Commodities Down in Price

Lettuce; and Steel Products (6).

 

Commodities in Short Supply

Blades; Construction Contractors (2); Construction Subcontractors (24); IV Solutions (3); Labor (15); Labor — Construction (45); Labor — Temporary (6); and Pharmaceuticals (4).

The number of consecutive months the commodity is listed is indicated after each item


DECEMBER 2019 Non-Manufacturing Index Summaries


In December, the NMI® registered 55 percent, 1.1 percentage points higher than the 53.9 percent in November. The non-manufacturing sector grew for the 119th consecutive month. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.

An NMI® above 48.6 percent, over time, generally indicates an expansion of the overall economy. Therefore, the December NMI® indicates growth for the 125th consecutive month in the overall economy and expansion in the non-manufacturing sector for the 119th consecutive month. Nieves says, "The past relationship between the NMI® and the overall economy indicates that the NMI® for December (55 percent) corresponds to a 2.2-percent increase in real gross domestic product (GDP) on an annualized basis."

NMI® History

MonthNMI®
Dec 2019 55.0
Nov 2019 53.9
Oct 2019 54.7
Sep 2019 52.6
Aug 2019 56.4
Jul 2019 53.7
MonthNMI®
Jun 2019 55.1
May 2019 56.9
Apr 2019 55.5
Mar 2019 56.1
Feb 2019 59.7
Jan 2019 56.7
55.5
59.7
52.6

Business Activity

ISM®'s Business Activity Index registered 57.2 percent in December, an increase of 5.6 percentage points from the November reading of 51.6 percent. This represents growth in business activity for the 125th consecutive month. Comments from respondents include: "Success in converting sales efforts into contracts" and "November was unusually low, but December has rebounded back to where business should have been."

The 10 industries reporting growth of business activity in December — listed in order — are: Retail Trade; Management of Companies & Support Services; Arts, Entertainment & Recreation; Health Care & Social Assistance; Information; Professional, Scientific & Technical Services; Other Services; Transportation & Warehousing; Finance & Insurance; and Construction. The seven industries reporting a decrease in business activity for the month of December — listed in order — are: Educational Services; Wholesale Trade; Real Estate, Rental & Leasing; Accommodation & Food Services; Public Administration; Utilities; and Mining.

Business Activity% Higher% Same% LowerIndex
Dec 2019 27 52 21 57.2
Nov 2019 24 56 20 51.6
Oct 2019 30 52 18 57.0
Sep 2019 27 60 13 55.2

ISM®'s Non-Manufacturing New Orders Index registered 54.9 percent, a decrease of 2.2 percentage points from the November reading of 57.1 percent. New orders grew for the 125th consecutive month, at a slower rate compared with November. Comments from respondents include: "Attributing slowdown to end of year" and "Lower as we lean into the holiday season due to customer schedules."

The 10 industries reporting growth of new orders in December — listed in order — are: Retail Trade; Management of Companies & Support Services; Arts, Entertainment & Recreation; Finance & Insurance; Health Care & Social Assistance; Accommodation & Food Services; Information; Transportation & Warehousing; Professional, Scientific & Technical Services; and Utilities. The six industries reporting contraction in December — listed in order — are: Educational Services; Public Administration; Wholesale Trade; Construction; Other Services; and Mining.

New Orders% Higher% Same% LowerIndex
Dec 2019 25 55 20 54.9
Nov 2019 28 57 15 57.1
Oct 2019 26 56 18 55.6
Sep 2019 28 56 16 53.7

Employment activity in the non-manufacturing sector grew in December for the 70th consecutive month. ISM®'s Non-Manufacturing Employment Index registered 55.2 percent, a decrease of 0.3 percentage point from the November reading of 55.5 percent. Ten industries reported increased employment, and six industries reported decreased employment. Comments from respondents include: "Matching resources to strong demand for 2019 that is expected to continue in 2020" and "Difficult to find qualified candidates in some fields. Commercial driver's license truck drivers with good driving records are hard to find due to market demand."

The 10 industries reporting an increase in employment in December — listed in order — are: Arts, Entertainment & Recreation; Utilities; Management of Companies & Support Services; Health Care & Social Assistance; Accommodation & Food Services; Other Services; Retail Trade; Professional, Scientific & Technical Services; Wholesale Trade; and Transportation & Warehousing. The six industries reporting a reduction in employment in December — listed in order — are: Educational Services; Agriculture, Forestry, Fishing & Hunting; Construction; Information; Public Administration; and Finance & Insurance.

Employment% Higher% Same% LowerIndex
Dec 2019 21 67 12 55.2
Nov 2019 21 66 13 55.5
Oct 2019 22 65 13 53.7
Sep 2019 21 60 19 50.4

Supplier Deliveries

The Supplier Deliveries Index registered 52.5 percent, which is 1 percentage point higher than the 51.5 percent reported in November. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: "Requested that suppliers ship before the holiday period" and "Increase in work and longer lead times for materials."

The eight industries reporting slower deliveries in December — listed in order — are: Utilities; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Information; Construction; Transportation & Warehousing; Health Care & Social Assistance; and Wholesale Trade. The three industries reporting faster deliveries in December are: Real Estate, Rental & Leasing; Public Administration; and Professional, Scientific & Technical Services. Seven industries reported no change in December compared to November.

Supplier Deliveries% Slower% Same% FasterIndex
Dec 2019 9 87 4 52.5
Nov 2019 8 87 5 51.5
Oct 2019 8 89 3 52.5
Sep 2019 8 86 6 51.0

Inventories*

ISM®'s Non-Manufacturing Inventories Index grew in December, registering 51 percent, which is 0.5 percentage point higher than the 50.5 percent reported in November. Of the total respondents in December, 31 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Only slightly higher, but within the range we want to see based on the activity" and "Minimizing inventory for end-of-year count."

The eight industries reporting an increase in inventories in December — listed in order — are: Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Construction; Health Care & Social Assistance; Professional, Scientific & Technical Services; Utilities; Information; and Retail Trade. The nine industries reporting a decrease in inventories in December — listed in order — are: Arts, Entertainment & Recreation; Educational Services; Real Estate, Rental & Leasing; Mining; Accommodation & Food Services; Public Administration; Transportation & Warehousing; Finance & Insurance; and Wholesale Trade.

Inventories% Higher% Same% LowerIndex
Dec 2019 22 58 20 51.0
Nov 2019 20 61 19 50.5
Oct 2019 19 63 18 50.5
Sep 2019 20 66 14 53.0

Prices paid by non-manufacturing organizations for materials and services increased in December for the 31st consecutive month. ISM®'s Non-Manufacturing Prices Index registered 58.5 percent; the same figure reported in November.

The nine non-manufacturing industries reported an increase in prices paid during the month of December — listed in order — are: Accommodation & Food Services; Construction; Wholesale Trade; Health Care & Social Assistance; Utilities; Retail Trade; Information; Finance & Insurance; and Public Administration. The three industries that reported a decrease in prices in December are: Management of Companies & Support Services; Mining; and Professional, Scientific & Technical Services. Six industries reported no change in December compared to November.

Prices% Higher% Same% LowerIndex
Dec 2019 16 79 5 58.5
Nov 2019 18 76 6 58.5
Oct 2019 19 74 7 56.6
Sep 2019 24 70 6 60.0
NOTE: Commodities reported as up in price and down in price are listed in the commodities section of this report.

Backlog of Orders

ISM®'s Non-Manufacturing Backlog of Orders Index contracted in December for the fourth time in the last five months. The index registered 47.5 percent, which is the 1 percentage point lower than the 48.5 reported in November. Of the total respondents in December, 37 percent indicated they do not measure backlog of orders.

The seven industries reporting an increase in order backlogs in December — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Management of Companies & Support Services; Health Care & Social Assistance; Public Administration; Construction; and Finance & Insurance. The seven industries that reported a decrease in backlogs in December — listed in order — are: Educational Services; Wholesale Trade; Other Services; Information; Professional, Scientific & Technical Services; Mining; and Transportation & Warehousing.

Backlog of Orders% Higher% Same% LowerIndex
Dec 2019 11 73 16 47.5
Nov 2019 14 69 17 48.5
Oct 2019 14 69 17 48.5
Sep 2019 18 72 10 54.0

New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the U.S. by domestically based personnel grew in December. The New Export Orders Index registered 51 percent, 1 percentage point lower than the 52 percent reported in November. Of the total respondents in December, 60 percent indicated they either do not perform, or do not separately measure, orders for work outside of the U.S.

The four industries reporting an increase in new export orders in December are: Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Other Services; and Professional, Scientific & Technical Services. The five industries that reported a decrease in exports in December are: Utilities; Educational Services; Real Estate, Rental & Leasing; Mining; and Wholesale Trade. Nine industries reported no change in exports in December compared to November.

New Export Orders% Higher% Same% LowerIndex
Dec 2019 10 82 8 51.0
Nov 2019 13 78 9 52.0
Oct 2019 8 84 8 50.0
Sep 2019 11 82 7 52.0

The Imports Index contracted for the fourth consecutive month, registering 48 percent in December, 3 percentage points higher than November's figure of 45 percent. Fifty-four percent of respondents reported that they do not use, or do not track the use of, imported materials.

The four industries reporting an increase in imports for the month of December are: Real Estate, Rental & Leasing; Finance & Insurance; Transportation & Warehousing; and Information. The eight industries that reported a decrease in imports — listed in order — are: Arts, Entertainment & Recreation; Educational Services; Mining; Other Services; Retail Trade; Accommodation & Food Services; Construction; and Wholesale Trade. Six industries reported no change in imports in December as compared to November.

Imports% Higher% Same% LowerIndex
Dec 2019 11 74 15 48.0
Nov 2019 3 84 13 45.0
Oct 2019 5 87 8 48.5
Sep 2019 9 80 11 49.0
*The Inventories, Customers' Inventories, Prices, Backlog of Orders, New Export Orders and Imports Indexes do not meet the accepted criteria for seasonal adjustments.

Inventory Sentiment

The ISM® Non-Manufacturing Inventory Sentiment Index in December registered 60 percent, 1.5 percentage points higher than the 58.5 percent reading in November. This indicates that respondents believe their inventories are still too high.

The 11 industries reporting sentiment that their inventories were too high in December — listed in order — are: Information; Real Estate, Rental & Leasing; Wholesale Trade; Utilities; Other Services; Health Care & Social Assistance; Accommodation & Food Services; Management of Companies & Support Services; Mining; Construction; and Public Administration. The three industries reporting a feeling that their inventories were too low in December are: Educational Services; Transportation & Warehousing; and Finance & Insurance.

Inventory Sentiment% Too High% About Right% Too LowIndex
Dec 2019 25 70 5 60.0
Nov 2019 23 71 6 58.5
Oct 2019 20 74 6 57.0
Sep 2019 20 76 4 58.0

About This Report

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire U.S., while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of December 2019.

The data presented herein is obtained from a survey of non-manufacturing supply executives based on information they have collected within their respective organizations. ISM® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation

The Non-Manufacturing ISM® Report On Business® is based on data compiled from purchasing and supply executives nationwide. Membership of the Non-Manufacturing Business Survey Committee is diversified by NAICS, based on each industry's contribution to gross domestic product (GDP). The Non-Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; and Other Services (services such as Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services). According the BEA estimates for 2017 GDP (released November 1, 2018), the six largest non-manufacturing, non-government sectors are: Real Estate, Rental & Leasing; Professional, Scientific, & Technical Services; Health Care & Social Assistance; Finance & Insurance; Wholesale Trade; and Information.

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment and Supplier Deliveries), this report shows the percentage reporting each response and the diffusion index. Responses represent raw data and are never changed. Data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. All seasonal adjustment factors are subject annually to relatively minor changes when conditions warrant them. The remaining indexes have not indicated significant seasonality.

The NMI® (Non-Manufacturing Index) is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. An index reading above 50 percent indicates that the non-manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries Index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

An NMI® above 48.6 percent, over a period of time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 48.6 percent, it is generally declining. The distance from 50 percent or 48.6 percent is indicative of the strength of the expansion or decline.

The Non-Manufacturing ISM® Report On Business® survey is sent out to Non-Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM® then compiles the report for release on the third business day of the following month.

The industries reporting growth, as indicated in the Non-Manufacturing ISM® Report On Business® monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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About Institute for Supply Management®

Institute for Supply Management® (ISM®) serves supply management professionals in more than 90 countries. Its 50,000 members around the world manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business®, its highly regarded certification programs and the ISM Mastery Model®. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

The full text version of the Non-Manufacturing ISM® Report On Business® is posted on ISM®'s website at www.ismrob.org on the third business day* of every month after 10:00 a.m. ET.

The next Non-Manufacturing ISM® Report On Business® featuring January 2020 data will be released at 10:00 a.m. ET on Wednesday, February 5, 2020.

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