ISM Non-manufacturing - 10:10 am

December 2009 Non-Manufacturing ISM Report On Business^®

NMI (Non-Manufacturing Index) at 50.1%

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire United States, 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 2009.

Business Activity Index at 53.7%
New Orders Index at 52.1%
Employment Index at 44%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector grew in December after one month of contraction, 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, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee; and senior vice president — supply management for Hilton Worldwide. "The NMI (Non-Manufacturing Index) registered 50.1 percent in December, 1.4 percentage points higher than the 48.7 percent registered in November, indicating growth in the non-manufacturing sector for three out of the last four months. The Non-Manufacturing Business Activity Index increased 4.1 percentage points to 53.7 percent, reflecting growth after contracting for one month. The New Orders Index decreased 3 percentage points to 52.1 percent, and the Employment Index increased 2.4 percentage points to 44 percent. The Prices Index increased 0.9 percentage point to 58.7 percent in December, indicating a slight increase in prices paid from November. According to the NMI, seven non-manufacturing industries reported growth in December. Respondents' comments vary by industry and, for the most part, are either neutral or slightly more optimistic about business conditions."

INDUSTRY PERFORMANCE (Based on the NMI)

The seven industries reporting growth in December based on the NMI composite index — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Retail Trade; Other Services; Professional, Scientific & Technical Services; Public Administration; Health Care & Social Assistance; and Finance & Insurance. The nine industries reporting contraction in December — listed in order — are: Arts, Entertainment & Recreation; Educational Services; Utilities; Management of Companies & Support Services; Accommodation & Food Services; Real Estate, Rental & Leasing; Transportation & Warehousing; Wholesale Trade; and Construction.

WHAT RESPONDENTS ARE SAYING ...

• "Economy seems to have leveled off with expectation of an upswing in our business in Q1 2010." (Professional, Scientific & Technical Services)
• "There has been a slight upturn in our business activities; however, it is not entirely attributable to any one particular source." (Public Administration)
• "The environment seems to be improving, but we will continue to be cautious as we look forward." (Retail Trade)
• "The current economic conditions are continuing to have a flat or negative effect on our business." (Wholesale Trade)
• "No items in short supply; suppliers looking to set up agreements for 2010 with quarterly or semiannual price reviews." (Arts, Entertainment & Recreation)
  

* Non-Manufacturing ISM Report On Business^® data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. Manufacturing ISM Report On Business^® data is seasonally adjusted for New Orders, Production, Employment, Supplier Deliveries and Inventories.
** Number of months moving in current direction

COMMODITIES REPORTED UP / DOWN IN PRICE, and IN SHORT SUPPLY

Commodities Up in Price

Beef (2); Cheese (5); Copper; Copper Fittings; Copper Pipe; #2 Diesel Fuel (2); Gasoline (2); Natural Gas; and Plastic Bags.

Commodities Down in Price

No commodities are reported down in price.

Commodities in Short Supply

Masks [for TB/H1N1 use] (3) is the only commodity reported in short supply.
Note: The number of consecutive months the commodity is listed is indicated after each item.

NMI (Non-Manufacturing Index)

In December, the NMI registered 50.1 percent, indicating growth in the non-manufacturing sector after one month of contraction. 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.

NMI HISTORY

Month	NMI	Month	NMI
Dec 2009	50.1	Jun 2009	47.0
Nov 2009	48.7	May 2009	44.0
Oct 2009	50.6	Apr 2009	43.7
Sep 2009	50.9	Mar 2009	40.8
Aug 2009	48.4	Feb 2009	41.6
Jul 2009	46.4	Jan 2009	42.9
Average for 12 months — 46.3 High — 50.9 Low — 40.8

Business Activity

ISM's Non-Manufacturing Business Activity Index in December registered 53.7 percent, an increase of 4.1 percentage points when compared to the 49.6 percent registered in November. Seven industries reported increased business activity, and seven industries reported decreased activity for the month of December. Four industries reported no change from November. Comments from respondents include "General pickup in business" and "Regular seasonal boost, nothing out of the ordinary."
The industries reporting growth of business activity in December — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Retail Trade; Mining; Information; Professional, Scientific & Technical Services; Finance & Insurance; and Public Administration. The industries reporting decreased business activity in December — listed in order — are: Educational Services; Utilities; Arts, Entertainment & Recreation; Management of Companies & Support Services; Construction; Wholesale Trade; and Accommodation & Food Services.

Business Activity	% Higher	% Same	% Lower	Index
Dec 2009	26	50	24	53.7
Nov 2009	23	52	25	49.6
Oct 2009	25	58	17	55.2
Sep 2009	25	56	19	55.1

New Orders

ISM's Non-Manufacturing New Orders Index grew in December for the fourth consecutive month. The index registered 52.1 percent, which is a decrease of 3 percentage points from the 55.1 percent reported in November. Comments from respondents include: "Everyone trying to spend out before the year end and holiday vacations" and "Organizations need additional help to complete workload."
The six industries reporting growth of new orders in December — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Information; Retail Trade; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Public Administration. The seven industries reporting contraction of new orders in December — listed in order — are: Real Estate, Rental & Leasing; Educational Services; Utilities; Arts, Entertainment & Recreation; Management of Companies & Support Services; Wholesale Trade; and Accommodation & Food Services.

New Orders	% Higher	% Same	% Lower	Index
Dec 2009	22	55	23	52.1
Nov 2009	26	56	18	55.1
Oct 2009	25	58	17	55.6
Sep 2009	25	54	21	54.2

Employment

Employment activity in the non-manufacturing sector contracted in December for the 23rd time in the last 24 months. ISM's Non-Manufacturing Employment Index for December registered 44 percent. This reflects an increase of 2.4 percentage points when compared to the 41.6 percent registered in November. Four industries reported increased employment, 12 industries reported decreased employment, and two industries reported unchanged employment compared to November. Comments from respondents include: "Decrease in occupancy equals decrease in employment" and "Continuing to aggressively manage costs down."
The industries reporting an increase in employment in December are: Other Services; Retail Trade; Finance & Insurance; and Public Administration. The industries reporting a reduction in employment in December — listed in order — are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Mining; Management of Companies & Support Services; Information; Wholesale Trade; Transportation & Warehousing; Accommodation & Food Services; Construction; Utilities; Health Care & Social Assistance; and Professional, Scientific & Technical Services.

Employment	% Higher	% Same	% Lower	Index
Dec 2009	9	70	21	44.0
Nov 2009	11	61	28	41.6
Oct 2009	5	68	27	41.1
Sep 2009	13	60	27	44.3

Supplier Deliveries

The Supplier Deliveries Index registered 50.5 percent in December, indicating supplier deliveries were slower in December when compared to November. A reading above 50 percent indicates slower deliveries.
The five industries reporting slower deliveries in December are: Real Estate, Rental & Leasing; Wholesale Trade; Construction; Health Care & Social Assistance; and Public Administration. The five industries reporting faster supplier deliveries in December are: Information; Transportation & Warehousing; Retail Trade; Finance & Insurance; and Professional, Scientific & Technical Services.

Supplier Deliveries	% Slower	% Same	% Faster	Index
Dec 2009	8	85	7	50.5
Nov 2009	6	85	9	48.5
Oct 2009	6	89	5	50.5
Sep 2009	8	84	8	50.0

Inventories

ISM's Non-Manufacturing Inventories Index registered 51.5 percent in December, indicating that inventory levels grew in December after 15 consecutive months of contraction. Of the total respondents in December, 29 percent indicated they do not have inventories or do not measure them. Comments from respondents include "Deliberate buildup" and "Adjusting upward for holiday demand."
The six industries reporting an increase in inventories in December — listed in order — are: Information; Retail Trade; Utilities; Professional, Scientific & Technical Services; Accommodation & Food Services; and Health Care & Social Assistance. The eight industries reporting decreases in inventories in December — listed in order — are: Mining; Other Services; Management of Companies & Support Services; Transportation & Warehousing; Public Administration; Wholesale Trade; Arts, Entertainment & Recreation; and Finance & Insurance.

Inventories	% Higher	% Same	% Lower	Index
Dec 2009	21	61	18	51.5
Nov 2009	19	53	28	45.5
Oct 2009	15	56	29	43.0
Sep 2009	20	55	25	47.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased slightly in December. ISM's Non-Manufacturing Prices Index for December registered 58.7 percent, 0.9 percentage point higher than the 57.8 percent reported in November. In December, the percentage of respondents reporting higher prices is 19 percent, the percentage indicating no change in prices paid is 73 percent, and 8 percent of the respondents reported lower prices.
In December, eight industries reported an increase in prices paid, in the following order: Wholesale Trade; Arts, Entertainment & Recreation; Retail Trade; Construction; Health Care & Social Assistance; Accommodation & Food Services; Public Administration; and Finance & Insurance. The only industry reporting prices as decreasing for the month of December is Other Services.

Prices	% Higher	% Same	% Lower	Index
Dec 2009	19	73	8	58.7
Nov 2009	21	69	10	57.8
Oct 2009	14	73	13	53.0
Sep 2009	9	77	14	48.8

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index contracted in December for the second consecutive month. The index registered 48 percent, 0.5 percentage point lower than the 48.5 percent reported in November. Of the total respondents in December, 45 percent indicated they do not measure backlog of orders.
The three industries reporting an increase in order backlogs in December are: Construction; Transportation & Warehousing; and Public Administration. The five industries reporting lower backlog of orders in December are: Retail Trade; Real Estate, Rental & Leasing; Other Services; Professional, Scientific & Technical Services; and Wholesale Trade.

Backlog of Orders	% Higher	% Same	% Lower	Index
Dec 2009	13	70	17	48.0
Nov 2009	16	65	19	48.5
Oct 2009	19	69	12	53.5
Sep 2009	19	65	16	51.5

New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically based personnel contracted in December after two consecutive months of growth. The New Export Orders Index for December registered 46 percent, which is a decrease of 8.5 percentage points from November's index of 54.5 percent. Of the total respondents in December, 72 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.
The two industries reporting an increase in new export orders in December are: Agriculture, Forestry, Fishing & Hunting; and Retail Trade. The five industries reporting a decrease in export orders in December are: Educational Services; Transportation & Warehousing; Utilities; Other Services; and Professional, Scientific & Technical Services.

New Export Orders	% Higher	% Same	% Lower	Index
Dec 2009	13	66	21	46.0
Nov 2009	19	71	10	54.5
Oct 2009	18	71	11	53.5
Sep 2009	14	69	17	48.5

Imports

The ISM Non-Manufacturing Imports Index registered 52.5 percent indicating growth for the month of December. In the month of December, 63 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 the use of imports in December are: Agriculture, Forestry, Fishing & Hunting; Information; Retail Trade; and Accommodation & Food Services. The three industries reporting a decrease in imports for the month of December are: Educational Services; Transportation & Warehousing; and Utilities.

Imports	% Higher	% Same	% Lower	Index
Dec 2009	17	71	12	52.5
Nov 2009	5	82	13	46.0
Oct 2009	2	88	10	46.0
Sep 2009	9	85	6	51.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in December registered 61 percent. This is 0.5 percentage point lower than the 61.5 percent reported in November, indicating that respondents still believe their inventories are too high at this time. In December, 23 percent of respondents said their inventories were too high, 1 percent said their inventories were too low, and 76 percent said their inventories were about right.
The eight industries reporting a feeling that their inventories are too high in December — listed in order — are: Finance & Insurance; Wholesale Trade; Mining; Other Services; Management of Companies & Support Services; Accommodation & Food Services; Health Care & Social Assistance; and Retail Trade. The only industry reporting that their inventory is too low in December is Arts, Entertainment & Recreation.

Inventory Sentiment	%Too High	%About Right	%Too Low	Index
Dec 2009	23	76	1	61.0
Nov 2009	30	63	7	61.5
Oct 2009	30	67	3	63.5
Sep 2009	30	64	6	62.0

About this Report

The data presented herein is obtained from a survey of non-manufacturing supply managers 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. Use of the data is in the public domain and 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 supplied by the U.S. Department of Commerce and are subject annually to relatively minor changes when conditions warrant them. The remaining indexes have not indicated significant seasonality.
The NMI 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 in that index 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.
The Non-Manufacturing ISM Report On Business^® is published monthly by the Institute for Supply Management™, the largest supply management research and education organization in the United States. The Institute for Supply Management™, established in 1915, is the largest supply management organization in the world as well as one of the most respected. ISM's mission is to lead the supply management profession through its standards of excellence, research, promotional activities and education.
The full text version of the Non-Manufacturing ISM Report On Business^® is posted on ISM's Web site at www.ism.ws on the third business day of every month after 10:10 a.m. (ET).
The next Non-Manufacturing ISM Report On Business^® featuring the January 2010 data will be released at 10:00 a.m. (ET) on Wednesday, February 3, 2010.