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FOR RELEASE: November 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

 


October 2019 Non-Manufacturing ISM® Report On Business®

NMI® at 54.7%

GDP Growing at 2.1%


Business Activity Index at 57%

New Orders Index at 55.6%

Employment Index at 53.7%


(Tempe, Arizona) – Economic activity in the non-manufacturing sector grew in October for the 117th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.

INDUSTRY PERFORMANCE

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 54.7 percent, which is 2.1 percentage points above the September reading of 52.6 percent. This represents continued growth in the non-manufacturing sector, at a faster rate. The Non-Manufacturing Business Activity Index increased to 57 percent, 1.8 percentage points higher than the September reading of 55.2 percent, reflecting growth for the 123rd consecutive month. The New Orders Index registered 55.6 percent; 1.9 percentage points higher than the reading of 53.7 percent in September. The Employment Index increased 3.3 percentage points in October to 53.7 percent from the September reading of 50.4 percent. The Prices Index decreased 3.4 percentage points from the September reading of 60 percent to 56.6 percent, indicating that prices increased in October for the 29th consecutive month. According to the NMI®, 13 non-manufacturing industries reported growth. The non-manufacturing sector had an uptick in growth after reflecting a pullback in September. The respondents continue to be concerned about tariffs, labor resources and the geopolitical climate.”

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

WHAT RESPONDENTS ARE SAYING
  • “Labor shortage remains a major factor in the increased cost of logistics.” (Accommodation & Food Services)
  • “Current outlooks for commodities, equipment, and materials indicate purchasing now has leverage. Investment is still hampered by uncertainties in trade, global economic environment, manufacturing and the like.” (Construction)
  • “Wrapping up fiscal year budgets — overall outlook is positive.” (Finance & Insurance)
  • “Our business remains at the same level. There is no expectation for new orders, since clients normally do not make capital-expenditure decisions in the last quarter. Our only expectation is with regards to the U.S.-China trade deal outcome.” (Mining)
  • “Positive-but-cautious outlook, with oil prices hovering above [US]$50 a barrel.” (Professional, Scientific & Technical Services)
  • “Beginning of a new fiscal year brings a tremendous amount of spending.” (Public Administration)
  • “Business remains brisk and well ahead of last year to date, as we near the peak of our busiest season. Looking ahead, our customers remain upbeat about their business well into next year.” (Real Estate, Rental & Leasing)
  • “Preparing for an increase in holiday revenues.” (Transportation & Warehousing)
  • Business is still lower than this time last year due to tariff issues and a soft market.” (Wholesale Trade)

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

 Non-ManufacturingManufacturing
IndexSeries Index OctSeries Index SepPercent Point ChangeDirectionRate of ChangeTrend** (Months)Series Index OctSeries Index SepPercent Point Change
NMI®/ PMI® 54.7 52.6 +2.1 Growing Faster 117 48.3 47.8 +0.5
Business Activity/ Production 57.0 55.2 +1.8 Growing Faster 123 46.2 47.3 -1.1
New Orders 55.6 53.7 +1.9 Growing Faster 123 49.1 47.3 +1.8
Employment 53.7 50.4 +3.3 Growing Faster 68 47.7 46.3 +1.4
Supplier Deliveries 52.5 51.0 +1.5 Slowing Faster 5 49.5 51.1 -1.6
Inventories 50.5 53.0 -2.5 Growing Slower 3 48.9 46.9 +2.0
Prices 56.6 60.0 -3.4 Increasing Slower 29 45.5 49.7 -4.2
Backlog of Orders 48.5 54.0 -5.5 Contracting From Growing 1 44.1 45.1 -1.0
New Export Orders 50.0 52.0 -2.0 Unchanged From Growing 1 50.4 41.0 +9.4
Imports 48.5 49.0 -0.5 Contracting Faster 2 45.3 48.1 -2.8
Inventory Sentiment 57.0 58.0 -1.0 Too High Slower 268 N/A N/A N/A
Customers' Inventories N/A N/A N/A N/A N/A N/A 47.8 45.5 +2.3
Overall Economy Growing Faster 123
Non-Manufacturing Sector Growing Faster 117
Non-Manufacturing ISM® Report On Business® data is seasonally adjusted for the Business Activity, New Orders, Prices and Employment Inexes. 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); Electrical Components; Lumber Products; and Pork Products.

 

Commodities Down in Price

Bacon; Diesel; Gasoline (3); Steel Products (4); and Transportation Costs.

 

Commodities in Short Supply

Catheters; Construction Subcontractors (22); IV solutions; Labor (13); Labor — Construction (43); Labor — Temporary (4); and Pharmaceuticals (2).

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


OCTOBER 2019 Non-Manufacturing Index Summaries


In October, the NMI® registered 54.7 percent, 2.1 percentage points higher than the 52.6 percent in September. The non-manufacturing sector grew for the 117th 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 October NMI® indicates growth for the 123rd consecutive month in the overall economy and expansion in the non-manufacturing sector for the 117th consecutive month. Nieves says, “The past relationship between the NMI® and the overall economy indicates that the NMI® for October (54.7 percent) corresponds to a 2.1-percent increase in real gross domestic product (GDP) on an annualized basis.”

NMI® History

MonthNMI®
Oct 2019 54.7
Sep 2019 52.6
Aug 2019 56.4
Jul 2019 53.7
Jun 2019 55.1
May 2019 56.9
MonthNMI®
Apr 2019 55.5
Mar 2019 56.1
Feb 2019 59.7
Jan 2019 56.7
Dec 2018 58.0
Nov 2018 60.4
56.3
60.4
52.6

Business Activity

ISM®’s Business Activity Index registered 57 percent in October, an increase of 1.8 percentage points from the September reading of 55.2 percent. This represents growth in business activity for the 123rd consecutive month. Thirteen industries reported increased business activity. Comments from respondents include: “Increased demand of customer base/new customers” and “New fiscal year means funding is now available for several projects and purchasing of operational items.”

The 13 industries reporting growth of business activity in October — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Construction; Transportation & Warehousing; Finance & Insurance; Management of Companies & Support Services; Health Care & Social Assistance; Public Administration; and Information. The three industries reporting a decrease in business activity for the month of October are: Educational Services; Other Services; and Wholesale Trade.

Business Activity% Higher% Same% LowerIndex
Oct 2019 30 52 18 57.0
Sep 2019 27 60 13 55.2
Aug 2019 32 57 11 61.5
Jul 2019 23 60 17 53.1

ISM®’s Non-Manufacturing New Orders Index registered 55.6 percent, an increase of 1.9 percentage points from the September reading of 53.7 percent. New orders grew in October for the 123rd consecutive month, at a faster rate compared with September. Comments from respondents include: “Business expansion” and “Fiscal year-end push.”

The 10 industries reporting growth of new orders in October — listed in order — are: Utilities; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Real Estate, Rental & Leasing; Transportation & Warehousing; Health Care & Social Assistance; Management of Companies & Support Services; Professional, Scientific & Technical Services; Information; and Finance & Insurance. The six industries reporting contraction in October are: Other Services; Educational Services; Retail Trade; Wholesale Trade; Public Administration; and Mining.

New Orders% Higher% Same% LowerIndex
Oct 2019 26 56 18 55.6
Sep 2019 28 56 16 53.7
Aug 2019 31 57 12 60.3
Jul 2019 23 60 17 54.1

Employment activity in the non-manufacturing sector grew in October for the 68th consecutive month. ISM®’s Non-Manufacturing Employment Index registered 53.7 percent, an increase of 3.3 percentage points from the September reading of 50.4 percent. Eleven industries reported increased employment, and four industries reported decreased employment. Comments from respondents include: “Staffing for new business sites” and “Higher employment levels required for workload.”

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

Employment% Higher% Same% LowerIndex
Oct 2019 22 65 13 53.7
Sep 2019 21 60 19 50.4
Aug 2019 22 60 18 53.1
Jul 2019 27 61 12 56.2

Supplier Deliveries

The Supplier Deliveries Index registered 52.5 percent, which is 1.5 percent higher than the 51 percent reported in September. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: “Factory loads are higher, which is pushing out lead times” and “Weather is delaying some deliveries.”

The eight industries reporting slower deliveries in October — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Utilities; Other Services; Wholesale Trade; Management of Companies & Support Services; Professional, Scientific & Technical Services; and Health Care & Social Assistance. The two industries reporting faster deliveries in October are: Mining; and Construction. Eight industries reported no change in supplier deliveries in October compared to September.

Supplier Deliveries% Slower% Same% FasterIndex
Oct 2019 8 89 3 52.5
Sep 2019 8 86 6 51.0
Aug 2019 5 91 4 50.5
Jul 2019 7 89 4 51.5

ISM®’s Non-Manufacturing Inventories Index grew in October, registering 50.5 percent, which is 2.5 percentage points lower than the 53 percent that was reported in September. Of the total respondents in October, 31 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “We have a drawdown of excess safety stock” and “Intentional buildup in support of upcoming peak season.”

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

Inventories% Higher% Same% LowerIndex
Oct 2019 19 63 18 50.5
Sep 2019 20 66 14 53.0
Aug 2019 22 66 12 55.0
Jul 2019 15 70 15 50.0

Prices paid by non-manufacturing organizations for materials and services increased in October for the 29th consecutive month. ISM®’s Non-Manufacturing Prices Index registered 56.6 percent; 3.4 percentage points lower than the 60 percent reported in September.

Eleven non-manufacturing industries reported an increase in prices paid during the month of October, listed in the following order: Wholesale Trade; Retail Trade; Management of Companies & Support Services; Public Administration; Other Services; Accommodation & Food Services; Professional, Scientific & Technical Services; Health Care & Social Assistance; Finance & Insurance; Construction; and Transportation & Warehousing. The two industries that reported a decrease in prices in October are: Mining; and Information.

Prices% Higher% Same% LowerIndex
Oct 2019 19 74 7 56.6
Sep 2019 24 70 6 60.0
Aug 2019 20 74 6 58.2
Jul 2019 21 73 6 56.5
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 October. The index registered 48.5 percent, which is 5.5 percentage points lower than the 54 percent reported in September. Of the total respondents in October, 37 percent indicated they do not measure backlog of orders.

The five industries reporting an increase in order backlogs in October — listed in order — are: Management of Companies & Support Services; Professional, Scientific & Technical Services; Transportation & Warehousing; Health Care & Social Assistance; and Finance & Insurance. The 10 industries that reported a decrease in backlogs in October — listed in order — are: Arts, Entertainment & Recreation; Educational Services; Agriculture, Forestry, Fishing & Hunting; Other Services; Real Estate, Rental & Leasing; Information; Retail Trade; Wholesale Trade; Public Administration; and Construction.

Backlog of Orders% Higher% Same% LowerIndex
Oct 2019 14 69 17 48.5
Sep 2019 18 72 10 54.0
Aug 2019 12 74 14 49.0
Jul 2019 18 71 11 53.5

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 was unchanged in October after 32 consecutive months of growth. The New Export Orders Index registered 50 percent in October, which is 2 percentage points lower than the 52 percent reported in September. Of the total respondents in October, 63 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 October are: Real Estate, Rental & Leasing; Accommodation & Food Services; Construction; and Health Care & Social Assistance. The five industries that reported a decrease in exports in October are: Utilities; Arts, Entertainment & Recreation; Educational Services; Wholesale Trade; and Information. Nine industries reported no change in exports in October compared to September.

New Export Orders% Higher% Same% LowerIndex
Oct 2019 8 84 8 50.0
Sep 2019 11 82 7 52.0
Aug 2019 11 79 10 50.5
Jul 2019 13 81 6 53.5

The Imports Index contracted for the second consecutive month registering 48.5 percent in October, 0.5 percentage point lower than September’s figure of 49 percent. Fifty-one percent of respondents reported that they do not use, or do not track the use of, imported materials.

The two industries reporting an increase in imports for the month of October are: Retail Trade; and Accommodation & Food Services. The five industries that reported a decrease in imports in are: Arts, Entertainment & Recreation; Other Services; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Wholesale Trade. Eleven industries reported no change in imports in October as compared to September.

Imports% Higher% Same% LowerIndex
Oct 2019 5 87 8 48.5
Sep 2019 9 80 11 49.0
Aug 2019 11 79 10 50.5
Jul 2019 10 87 3 53.5

Inventory Sentiment

The ISM® Non-Manufacturing Inventory Sentiment Index in October registered 57 percent, 1 percentage point lower than the 58 percent reading in September. This indicates that respondents believe their inventories are still too high.

The 10 industries reporting sentiment that their inventories were too high in October — listed in order — are: Wholesale Trade; Information; Utilities; Finance & Insurance; Management of Companies & Support Services; Retail Trade; Accommodation & Food Services; Mining; Construction; and Public Administration. The four industries reporting a feeling that their inventories were too low in October are: Real Estate, Rental & Leasing; Educational Services; Transportation & Warehousing; and Professional, Scientific & Technical Services.

Inventory Sentiment% Too High% About Right% Too LowIndex
Oct 2019 20 74 6 57.0
Sep 2019 20 76 4 58.0
Aug 2019 17 78 5 56.0
Jul 2019 23 75 2 60.5

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 October 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 report on information for the current month for U.S. operations only. 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 November 2019 data will be released at 10:00 a.m. ET on Wednesday, December 4, 2019.

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