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July 2019 Non-Manufacturing ISM® Report On Business®

FOR RELEASE: August 5, 2019

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

 


NMI® at 53.7%


Business Activity Index at 53.1%

New Orders Index at 54.1%

Employment Index at 56.2%


(Tempe, Arizona) – Economic activity in the non-manufacturing sector grew in July for the 114th 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 53.7 percent, which is 1.4 percentage points lower than the June reading of 55.1 percent. This represents continued growth in the non-manufacturing sector, at a slower rate. This is the index’s lowest reading since August 2016, when it registered 51.8 percent. The Non-Manufacturing Business Activity Index decreased to 53.1 percent, 5.1 percentage points lower than the June reading of 58.2 percent, reflecting growth for the 120th consecutive month. The New Orders Index registered 54.1 percent; 1.7 percentage points lower than the reading of 55.8 percent in June. The Employment Index increased 1.2 percentage points in July to 56.2 percent from the June reading of 55 percent. The Prices Index decreased 2.4 percentage points from the June reading of 58.9 percent to 56.5 percent, indicating that prices increased in July for the 26th consecutive month. According to the NMI®, 13 non-manufacturing industries reported growth. The non-manufacturing sector’s rate of growth continued to cool off. Respondents indicated ongoing concerns related to tariffs and employment resources. Comments remained mixed about business conditions and the overall economy.”

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

What respondents are saying
  • “Business is still strong, considering the seasonality.” (Accommodation & Food Services)
  • “Business volumes were flat compared to the previous month.” (Health Care & Social Assistance)
  • “Tariffs continue to push costs higher, and customers are looking for more discounts due to mortgage-rate fluctuations.” (Construction)
  • “Some uncertainty hinges on tariffs, but there have been no changes in market conditions.” (Information)
  • “For our company, July is looking to be a record-setting month for sales. Customers have been converting quotes to sales quicker than in past months. The tariffs have increased prices for our industry, but our clients are not balking at the slight price increases that have been passed along. We feel that (the third quarter) will be strong.” (Management of Companies & Support Services)
  • “It appears that the mining capital-expense environment is improving, with a good prospectus for the coming months. Our dependence on Chinese and Asian supply chains remains strong. NAFTA countries do not have the same capacity and speed.” (Mining)
  • “Companies involved in the oil and gas industry remain cautious relative to hiring direct employees and contingent workers, as well as investing in new capital projects. Volatility in oil price and geopolitical concerns are driving this wait-and-see approach.” (Professional, Scientific & Technical Services)
  • “Demand seems strong. There are still pressures for skilled labor. It is difficult to find fully qualified candidates. Suppliers are having trouble with demand.” (Public Administration)
  • “As our corporate objectives drive us more and more into digitization, advanced analytics, and data management in general, we are finding it increasingly difficult to find, develop and retain professional with advanced skills in these disciplines.” (Retail Trade)
  • “Business is somewhat slow for the first half of 2019, but it is expected to pick up for the second half.” (Wholesale Trade)

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

 Non-ManufacturingManufacturing
IndexSeries Index JulSeries Index JunPercent Point ChangeDirectionRate of ChangeTrend** (Months)Series Index JulSeries Index JunPercent Point Change
NMI®/ PMI® 53.7 55.1 -1.4 Growing Slower 114 51.2 51.7 -0.5
Business Activity/ Production 53.1 58.2 -5.1 Growing Slower 120 50.8 54.1 -3.3
New Orders 54.1 55.8 -1.7 Growing Slower 120 50.8 50.0 +0.8
Employment 56.2 55.0 +1.2 Growing Faster 65 51.7 54.5 -2.8
Supplier Deliveries 51.5 51.5 0.0 Slowing Same 2 53.3 50.7 +2.6
Inventories 50.0 55.0 -5.0 Unchanged From Growing 1 49.5 49.1 +0.4
Prices 56.5 58.9 -2.4 Increasing Slower 26 45.1 47.9 -2.8
Backlog of Orders 53.5 56.0 -2.5 Growing Slower 19 43.1 47.4 -4.3
New Export Orders 53.5 55.5 -2.0 Growing Slower 30 48.1 50.5 -2.4
Imports 53.5 50.0 +3.5 Growing From Unchanged 1 47.0 50.0 -3.0
Inventory Sentiment 60.5 58.5 +2.0 Too High Faster 265 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 45.7 44.6 +1.1
Overall Economy Growing Slower 120
Non-Manufacturing Sector Growing Slower 114
Non-Manufacturing ISM® Report On Business® data is seasonally adjusted for the 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 (2); Dairy (3); Diesel Fuel (5); Gasoline (5); Lettuce Blends; and Pork Products (2).

 

Commodities Down in Price

Bacon; Fuel (2); and Steel Products.

 

Commodities in Short Supply

Construction Subcontractors (19); Labor (10); Labor — Construction (40); Labor — Temporary and Medical Supplies (2).

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


July 2019 Non-Manufacturing Index Summaries


NMI®

In July, the NMI® registered 53.7 percent, 1.4 percentage points lower than the 55.1 percent in June. The non-manufacturing sector grew for the 114th 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 July NMI® indicates growth for the 120th consecutive month in the overall economy and expansion in the non-manufacturing sector for the 114th consecutive month. Nieves says, “The past relationship between the NMI® and the overall economy indicates that the NMI® for July (53.7 percent) corresponds to a 1.8-percent increase in real gross domestic product (GDP) on an annualized basis.”

NMI® History

MonthNMI®
Jul 2019 53.7
Jun 2019 55.1
May 2019 56.9
Apr 2019 55.5
Mar 2019 56.1
Feb 2019 59.7
MonthNMI®
Jan 2019 56.7
Dec 2018 58.0
Nov 2018 60.4
Oct 2018 60.0
Sep 2018 60.8
Aug 2018 58.8
57.6
60.8
53.7

Business Activity

ISM®’s Business Activity Index registered 53.1 percent in July, a decrease of 5.1 percentage points from the June reading of 58.2 percent. This represents growth in business activity for the 120th consecutive month. Nine industries reported increased business activity. Comments from respondents include: “Summer tends to be a slower time of year” and “Slowdown due to [economic and trade] uncertainty.”

The nine industries reporting growth of business activity in July — listed in order — are: Utilities; Accommodation & Food Services; Professional, Scientific & Technical Services; Finance & Insurance; Information; Construction; Other Services; Transportation & Warehousing; and Public Administration. The six industries reporting a decrease in business activity for the month of July are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Educational Services; Wholesale Trade; and Health Care & Social Assistance.

Business Activity% Higher% Same% LowerIndex
Jul 2019 23 60 17 53.1
Jun 2019 32 56 12 58.2
May 2019 33 59 8 61.2
Apr 2019 36 56 8 59.5

New Orders

ISM®’s Non-Manufacturing New Orders Index registered 54.1 percent, a decrease of 1.7 percentage points from the June reading of 55.8 percent. New orders grew in July for the 120th consecutive month, at a slower rate compared with June. Comments from respondents include: “Customers are feeling confident about future business and the economy” and “The strong economy has made this growth a continuation of previous months’ growth.”

The 11 industries reporting growth of new orders in July — listed in order — are: Utilities; Professional, Scientific & Technical Services; Construction; Transportation & Warehousing; Mining; Finance & Insurance; Accommodation & Food Services; Health Care & Social Assistance; Information; Other Services; and Management of Companies & Support Services. The five industries reporting contraction in July are: Arts, Entertainment & Recreation; Wholesale Trade; Retail Trade; Agriculture, Forestry, Fishing & Hunting; and Public Administration.

New Orders% Higher% Same% LowerIndex
Jul 2019 23 60 17 54.1
Jun 2019 32 54 14 55.8
May 2019 30 59 11 58.6
Apr 2019 36 54 10 58.1

Employment

Employment activity in the non-manufacturing sector grew in July for the 65th consecutive month. ISM®’s Non-Manufacturing Employment Index registered 56.2 percent, an increase of 1.2 percentage points from the June reading of 55 percent. Eleven industries reported increased employment, and four industries reported decreased employment. Comments from respondents include: “We continue to hire for open positions” and “Unable to find qualified applicants.”

The 11 industries reporting an increase in employment in July — listed in order — are: Real Estate, Rental & Leasing; Accommodation & Food Services; Construction; Professional, Scientific & Technical Services; Other Services; Transportation & Warehousing; Utilities; Public Administration; Information; Wholesale Trade; and Finance & Insurance. The four industries reporting a reduction in employment in July are: Educational Services; Mining; Agriculture, Forestry, Fishing & Hunting; and Retail Trade.

Employment% Higher% Same% LowerIndex
Jul 2019 27 61 12 56.2
Jun 2019 28 61 11 55.0
May 2019 28 62 10 58.1
Apr 2019 23 62 15 53.7

Supplier Deliveries

The Supplier Deliveries Index registered 51.5 percent, which is the same percent registered in June. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: “Shortage of warehouse personnel delays scheduled deliveries to the point where it impacts operations” and “Lead times are starting to increase mainly due to low unemployment (retention of good employees) and driver shortage.”

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

Supplier Deliveries% Slower% Same% FasterIndex
Jul 2019 7 89 4 51.5
Jun 2019 8 87 5 51.5
May 2019 4 91 5 49.5
Apr 2019 7 87 6 50.5

Inventories*

ISM®’s Non-Manufacturing Inventories Index was unchanged in July, registering 50 percent, which is 5 percentage points lower than the 55 percent that was reported in June. Of the total respondents in July, 27 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Letting supplies run lower than normal to keep expenses down” and “Demand lower than expected.”

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

Inventories% Higher% Same% LowerIndex
Jul 2019 15 70 15 50.0
Jun 2019 23 64 13 55.0
May 2019 21 66 13 54.0
Apr 2019 21 61 18 51.5

Prices*

Prices paid by non-manufacturing organizations for materials and services increased in July for the 26th consecutive month. ISM®’s Non-Manufacturing Prices Index registered 56.5 percent; 2.4 percentage points lower than the 58.9 percent reported in June.

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

Prices% Higher% Same% LowerIndex
Jul 2019 21 73 6 56.5
Jun 2019 27 65 8 58.9
May 2019 21 76 3 55.4
Apr 2019 20 76 4 55.7
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 July. The index registered 53.5 percent, which is 2.5 percentage points lower than the 56 percent reported in June. Of the total respondents in July, 36 percent indicated they do not measure backlog of orders.

The eight industries reporting an increase in order backlogs in July — listed in order — are: Educational Services; Accommodation & Food Services; Mining; Construction; Transportation & Warehousing; Health Care & Social Assistance; Finance & Insurance; and Professional, Scientific & Technical Services. The four industries that reported a decrease in backlogs in July are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Wholesale Trade; and Public Administration. Six industries reported no change in July compared to June.

Backlog of Orders% Higher% Same% LowerIndex
Jul 2019 18 71 11 53.5
Jun 2019 23 66 11 56.0
May 2019 14 77 9 52.5
Apr 2019 20 70 10 55.0

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 30th consecutive month. The New Export Orders Index registered 53.5 percent in July, which is 2 percentage points lower than the 55.5 percent that was reported in June. Of the total respondents in July, 61 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 July — listed in order — are: Real Estate, Rental & Leasing; Information; Finance & Insurance; Transportation & Warehousing; Professional, Scientific & Technical Services; and Accommodation & Food Services. The four industries that reported a decrease in exports in July are: Utilities; Arts, Entertainment & Recreation; Educational Services; and Wholesale Trade. Eight industries reported no change in July compared to June.

New Export Orders% Higher% Same% LowerIndex
Jul 2019 13 81 6 53.5
Jun 2019 20 71 9 55.5
May 2019 13 85 2 55.5
Apr 2019 20 74 6 57.0

Imports

The Imports Index was unchanged, registering 53.5 percent in July which is 3.5 percentage points higher than the 50 percent that was registered in June. Fifty percent of respondents reported that they do not use, or do not track the use of, imported materials.

The six industries reporting an increase in imports for the month of July — listed in order — are: Educational Services; Mining; Other Services; Professional, Scientific & Technical Services; Retail Trade; and Wholesale Trade. The two industries that reported a decrease in imports in July are: Arts, Entertainment & Recreation; and Management of Companies & Support Services. Ten industries reported no change in imports in July as compared to June.

Imports% Higher% Same% LowerIndex
Jul 2019 10 87 3 53.5
Jun 2019 9 82 9 50.0
May 2019 8 84 8 50.0
Apr 2019 16 78 6 55.0

Inventory Sentiment

The ISM® Non-Manufacturing Inventory Sentiment Index in July registered 60.5 percent, 2 percentage points higher than the 58.5 percent reading in June. This indicates that respondents believe their inventories are still too high.

The 12 industries reporting sentiment that their inventories were too high in July — listed in order — are: Wholesale Trade; Information; Utilities; Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Other Services; Finance & Insurance; Management of Companies & Support Services; Retail Trade; Accommodation & Food Services; Health Care & Social Assistance; and Public Administration. The three industries reporting a feeling that their inventories were too low in July are: Arts, Entertainment & Recreation; Educational Services; and Construction.

Inventory Sentiment% Too High% About Right% Too LowIndex
Jul 2019 23 75 2 60.5
Jun 2019 23 71 6 58.5
May 2019 21 75 4 58.5
Apr 2019 24 72 4 60.0

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 July 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 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®

IInstitute 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 August 2019 data will be released at 10:00 a.m. ET on Thursday, September 5, 2019.

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