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FOR RELEASE: October 3, 2019

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

 


September 2019 Non-Manufacturing ISM® Report On Business®

NMI® at 52.6%


Business Activity Index at 55.2%

New Orders Index at 53.7%

Employment Index at 50.4%


(Tempe, Arizona) – Economic activity in the non-manufacturing sector grew in September for the 116th 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 52.6 percent, which is 3.8 percentage points below the August reading of 56.4 percent. This represents continued growth in the non-manufacturing sector, at a slower rate. The Non-Manufacturing Business Activity Index decreased to 55.2 percent, 6.3 percentage points lower than the August reading of 61.5 percent, reflecting growth for the 122nd consecutive month. The New Orders Index registered 53.7 percent; 6.6 percentage points lower than the reading of 60.3 percent in August. The Employment Index decreased 2.7 percentage points in September to 50.4 percent from the August reading of 53.1 percent. The Prices Index increased 1.8 percentage points from the August reading of 58.2 percent to 60 percent, indicating that prices increased in September for the 28th consecutive month. According to the NMI®, 13 non-manufacturing industries reported growth. The non-manufacturing sector pulled back after reflecting strong growth in August. The respondents are mostly concerned about tariffs, labor resources and the direction of the economy.”

The 13 non-manufacturing industries reporting growth in September — listed in order — are: Utilities; Retail Trade; Construction; Mining; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Public Administration; Management of Companies & Support Services; Finance & Insurance; Transportation & Warehousing; Information; Health Care & Social Assistance; and Professional, Scientific & Technical Services. The four industries reporting a decrease are: Educational Services; Other Services; Real Estate, Rental & Leasing; and Wholesale Trade.

What respondents are saying
  • “Tariffs are adding uncertainty to short-term pricing on certain commodities, but suppliers are finding alternate solutions. The bigger impacts appear to be on demand side, which is driving short-term favorability in certain domestic markets.” (Accommodation & Food Services)
  • “Demand has been variable — up one month, down the next. I think customers are watching our input costs and buying ahead on the dips, to the extent that contracts allow.” (Agriculture, Forestry, Fishing & Hunting)
  • “We are very busy right now [and] expect to be so for the next 12 months. We are still very shorthanded with qualified labor.” (Construction)
  • “Gearing up for the fourth quarter of 2019. On track to end the year generally as anticipated, considering interest-rate changes, trade and tariff issues and other economic indicators and trends.” (Finance & Insurance)
  • “We continue with low patient census, which affects our orders and revenue.” (Health Care & Social Assistance)
  • “As employee cost [wages] are increasing in this better economy, it is getting harder to fight price increases on goods and services.” (Information)
  • “Costs are going up, from labor to chemicals to metals.” (Management of Companies & Support Services)
  • “While Chinese tariffs are understandable, they are impacting our supply chain decisions. We are actively pursuing alternate sources for our China-based production. At this point, we have not passed on tariff costs to our customers, but we are evaluating all options.” (Other Services)
  • “Business continues to pick up as we quickly approach Q4. Week by week, we inch closer to a much-anticipated holiday retail season, which requires not only last-minute buys, but a push to fill open positions.” (Retail Trade)

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

 Non-ManufacturingManufacturing
IndexSeries Index SepSeries Index AugPercent Point ChangeDirectionRate of ChangeTrend** (Months)Series Index SepSeries Index AugPercent Point Change
NMI®/ PMI® 52.6 56.4 -3.8 Growing Slower 116 47.8 49.1 -1.3
Business Activity/ Production 55.2 61.5 -6.3 Growing Slower 122 47.3 49.5 -2.2
New Orders 53.7 60.3 -6.6 Growing Slower 122 47.3 47.2 +0.1
Employment 50.4 53.1 -2.7 Growing Slower 67 46.3 47.4 -1.1
Supplier Deliveries 51.0 50.5 +0.5 Slowing Faster 4 51.1 51.4 -0.3
Inventories 53.0 55.0 -2.0 Growing Slower 2 46.9 49.9 -3.0
Prices 60.0 58.2 +1.8 Increasing Faster 28 49.7 46.0 +3.7
Backlog of Orders 54.0 49.0 +5.0 Growing From Contracting 1 45.1 46.3 -1.2
New Export Orders 52.0 50.5 +1.5 Growing Faster 32 41.0 43.3 -2.3
Imports 49.0 50.5 -1.5 Contracting From Growing 1 48.1 46.0 +2.1
Inventory Sentiment 58.0 56.0 +2.0 Too High Faster 267 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 45.5 44.9 +0.6
Overall Economy Growing Slower 122
Non-Manufacturing Sector Growing Slower 116
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.

Commodities reported up/down in price and in short supply


Commodities Up in Price

Cheese; Construction Subcontractors; Diesel; Freight; Fuel* (2); Gasoline*; Labor — Construction; Medical Supplies (2); and Pharmaceuticals.

 

Commodities Down in Price

Fuel*; Gasoline* (2); and Steel Products (3).

 

Commodities in Short Supply

Construction Subcontractors (21); Labor (12); Labor — Construction (42); Labor — Temporary (3); Medical Equipment; Pharmaceuticals; and Syringes.

Note: The number of consecutive months the commodity is listed is indicated after each item. *Indicates both up and down in price.


SEPTEMBER 2019 Non-Manufacturing Index Summaries


In September, the NMI® registered 52.6 percent, 3.8 percentage points lower than the 56.4 percent in August. This is the lowest reading since August 2016, when the NMI® registered 51.8 percent. The non-manufacturing sector grew for the 116th 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 September NMI® indicates growth for the 122nd consecutive month in the overall economy and expansion in the non-manufacturing sector for the 116th consecutive month. Nieves says, “The past relationship between the NMI® and the overall economy indicates that the NMI® for September (52.6 percent) corresponds to a 1.4-percent increase in real gross domestic product (GDP) on an annualized basis.”

NMI® History

MonthNMI®
Sep 2019 52.6
Aug 2019 56.4
Jul 2019 53.7
Jun 2019 55.1
May 2019 56.9
Apr 2019 55.5
MonthNMI®
Mar 2019 56.1
Feb 2019 59.7
Jan 2019 56.7
Dec 2018 58.0
Nov 2018 60.4
Oct 2018 60.0
56.8
60.4
52.6

Business Activity

ISM®’s Business Activity Index registered 55.2 percent in September, a decrease of 6.3 percentage points from the August reading of 61.5 percent. This represents growth in business activity for the 122nd consecutive month. Thirteen industries reported increased business activity. Comments from respondents include: “Increased commercial, residential-construction and service activity” and “Lower volumes than expected.”

The 13 industries reporting growth of business activity in September — listed in order — are: Utilities; Construction; Retail Trade; Mining; Finance & Insurance; Real Estate, Rental & Leasing; Public Administration; Transportation & Warehousing; Health Care & Social Assistance; Information; Professional, Scientific & Technical Services; Accommodation & Food Services; and Management of Companies & Support Services. The two industries reporting a decrease in business activity for the month of September are: Educational Services; and Other Services.

Business Activity% Higher% Same% LowerIndex
Sep 2019 27 60 13 55.2
Aug 2019 32 57 11 61.5
Jul 2019 23 60 17 53.1
Jun 2019 32 56 12 58.2

ISM®’s Non-Manufacturing New Orders Index registered 53.7 percent, a decrease of 6.6 percentage points from the August reading of 60.3 percent. New orders grew in September for the 122nd consecutive month, at a slower rate compared with August. Comments from respondents include: “New customer contracts” and “New projects were funded.”

The 12 industries reporting growth of new orders in September — listed in order — are: Utilities; Construction; Mining; Accommodation & Food Services; Public Administration; Retail Trade; Finance & Insurance; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; and Information. The four industries reporting contraction in September are: Educational Services; Real Estate, Rental & Leasing; Other Services; and Wholesale Trade.

New Orders% Higher% Same% LowerIndex
Sep 2019 28 56 16 53.7
Aug 2019 31 57 12 60.3
Jul 2019 23 60 17 54.1
Jun 2019 32 54 14 55.8

Employment activity in the non-manufacturing sector grew in September for the 67th consecutive month. ISM®’s Non-Manufacturing Employment Index registered 50.4 percent, a decrease of 2.7 percentage points from the August reading of 53.1 percent. Eleven industries reported increased employment, and four industries reported decreased employment. Comments from respondents include: “Number of new employees starting to level off” and “Tightening workforce is leading to a more competitive market for qualified potential employees.”

The 11 industries reporting an increase in employment in September — listed in order — are: Retail Trade; Utilities; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Other Services; Public Administration; Transportation & Warehousing; Mining; Information; and Health Care & Social Assistance. The four industries reporting a reduction in employment in September are: Educational Services; Finance & Insurance; Professional, Scientific & Technical Services; and Wholesale Trade.

Employment% Higher% Same% LowerIndex
Sep 2019 21 60 19 50.4
Aug 2019 22 60 18 53.1
Jul 2019 27 61 12 56.2
Jun 2019 28 61 11 55.0

Supplier Deliveries

The Supplier Deliveries Index registered 51 percent, which is 0.5 percent higher than the 50.5 percent reported in August. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: “Higher demands have slowed deliveries” and “Capacity constraints are pushing out lead times.”

The nine industries reporting slower deliveries in September — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Construction; Mining; Accommodation & Food Services; Information; Management of Companies & Support Services; Transportation & Warehousing; Public Administration; and Professional, Scientific & Technical Services. The six industries reporting faster deliveries — listed in order — are: Utilities; Real Estate, Rental & Leasing; Other Services; Health Care & Social Assistance; Finance & Insurance; and Wholesale Trade.

Supplier Deliveries% Slower% Same% FasterIndex
Sep 2019 8 86 6 51.0
Aug 2019 5 91 4 50.5
Jul 2019 7 89 4 51.5
Jun 2019 8 87 5 51.5

Inventories*

ISM®’s Non-Manufacturing Inventories Index grew in September, registering 53 percent, which is 2 percentage points lower than the 55 percent that was reported in August. Of the total respondents in September, 29 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Depleting on-hand inventory stocks” and “We are adjusting inventory lower to reflect lower expectations for sales in the coming months.”

The six industries reporting an increase in inventories in September — listed in order — are: Real Estate, Rental & Leasing; Utilities; Transportation & Warehousing; Accommodation & Food Services; Wholesale Trade; and Retail Trade. The six industries reporting a decrease in inventories in September — listed in order — are: Arts, Entertainment & Recreation; Educational Services; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Information; and Public Administration. Six industries reported no change in inventories in September compared to August.

Inventories% Higher% Same% LowerIndex
Sep 2019 20 66 14 53.0
Aug 2019 22 66 12 55.0
Jul 2019 15 70 15 50.0
Jun 2019 23 64 13 55.0

Prices paid by non-manufacturing organizations for materials and services increased in September for the 28th consecutive month. ISM®’s Non-Manufacturing Prices Index registered 60 percent; 1.8 percentage points higher than the 58.2 percent reported in August.

Fifteen non-manufacturing industries reported an increase in prices paid during the month of September, listed in the following order: Management of Companies & Support Services; Construction; Accommodation & Food Services; Arts, Entertainment & Recreation; Public Administration; Wholesale Trade; Health Care & Social Assistance; Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Utilities; Other Services; Retail Trade; Information; Finance & Insurance; and Transportation & Warehousing. The only industry that reported a decrease in prices in September is Mining.

Prices% Higher% Same% LowerIndex
Sep 2019 24 70 6 60.0
Aug 2019 20 74 6 58.2
Jul 2019 21 73 6 56.5
Jun 2019 27 65 8 58.9
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 grew in September. The index registered 54 percent, which is 5 percentage points higher than the 49 percent reported in August. Of the total respondents in September, 36 percent indicated they do not measure backlog of orders.

The eight industries reporting an increase in order backlogs in September — listed in order — are: Accommodation & Food Services; Utilities; Retail Trade; Construction; Management of Companies & Support Services; Mining; Information; and Professional, Scientific & Technical Services. The seven industries that reported a decrease in backlogs in September — listed in order — are: Arts, Entertainment & Recreation; Educational Services; Real Estate, Rental & Leasing; Other Services; Wholesale Trade; Public Administration; and Health Care & Social Assistance.

Backlog of Orders% Higher% Same% LowerIndex
Sep 2019 18 72 10 54.0
Aug 2019 12 74 14 49.0
Jul 2019 18 71 11 53.5
Jun 2019 23 66 11 56.0

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 for the 32nd consecutive month. The New Export Orders Index registered 52 percent in September, which is 1.5 percentage points higher than the 50.5 percent that was reported in August. Of the total respondents in September, 62 percent indicated they either do not perform, or do not separately measure, orders for work outside of the U.S.

The six industries reporting an increase in new export orders in September — listed in order — are: Accommodation & Food Services; Construction; Other Services; Retail Trade; Transportation & Warehousing; and Information. The six industries that reported a decrease in exports in September — listed in order — are: Utilities; Arts, Entertainment & Recreation; Educational Services; Mining; Wholesale Trade; and Professional, Scientific & Technical Services. Six industries reported no change in exports in September compared to August.

New Export Orders% Higher% Same% LowerIndex
Sep 2019 11 82 7 52.0
Aug 2019 11 79 10 50.5
Jul 2019 13 81 6 53.5
Jun 2019 20 71 9 55.5

The Imports Index contracted registering 49 percent in September which is 1.5 percentage points lower than the 50.5 percent that was registered in August. Fifty-three percent of respondents reported that they do not use, or do not track the use of, imported materials.

The three industries reporting an increase in imports for the month of September are: Accommodation & Food Services; Finance & Insurance; and Information. The seven industries that reported a decrease in imports in September — listed in order — are: Arts, Entertainment & Recreation; Transportation & Warehousing; Other Services; Mining; Agriculture, Forestry, Fishing & Hunting; Construction; and Wholesale Trade. Eight industries reported no change in imports in September as compared to August.

Imports% Higher% Same% LowerIndex
Sep 2019 9 80 11 49.0
Aug 2019 11 79 10 50.5
Jul 2019 10 87 3 53.5
Jun 2019 9 82 9 50.0

Inventory Sentiment

The ISM® Non-Manufacturing Inventory Sentiment Index in September registered 58 percent, 2 percentage points higher than the 56 percent reading in August. This indicates that respondents believe their inventories are still too high.

The eight industries reporting sentiment that their inventories were too high in September — listed in order — are: Wholesale Trade; Utilities; Retail Trade; Real Estate, Rental & Leasing; Management of Companies & Support Services; Mining; Health Care & Social Assistance; and Information. The four industries reporting a feeling that their inventories were too low in September are: Educational Services; Professional, Scientific & Technical Services; Transportation & Warehousing; and Public Administration. Six industries reported no change in inventory sentiment in September compared to August.

Inventory Sentiment% Too High% About Right% Too LowIndex
Sep 2019 20 76 4 58.0
Aug 2019 17 78 5 56.0
Jul 2019 23 75 2 60.5
Jun 2019 23 71 6 58.5

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 September 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).

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 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 the October 2019 data will be released at 10:00 a.m. ET on Tuesday, November 5, 2019.

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