Each month, Buyers Meeting Point covers the release of the ISM Non-Manufacturing Report on Business. The report is released the first week of every month for the previous month. This month’s report can be found here.
If you have never read the report, it can take some adjustment. We are going to boil each report down to the basic and most useable components. I also recommend reading the ISM Report on Business Brochure.
The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee. "According to the NMI, eight non-manufacturing industries reported growth in October. Even though there is month-over-month growth in the Employment Index, respondents are still expressing concern over available labor resources and job growth. The continued strong push for inventory reduction by supply management professionals has resulted in contraction in the Inventories Index for the first time in eight months. Respondents' comments are mixed and reflect concern about future business conditions."
If you only have 30 seconds, here is what you should know about this month’s report:
WHAT RESPONDENTS ARE SAYING ...
- "Business is fairly flat, with a slight increase noted for the month." (Health Care & Social Assistance)
- "Sales are increasing slightly, but are still lower than they have been historically." (Public Administration)
- "Some slowdown in the last month." (Finance & Insurance)
- "Business is steady, with a lot of price competition at the selling end of our business." (Agriculture, Forestry, Fishing & Hunting)
- "The poor economy is creating a drag on expected revenue through the end of this year." (Information)
- "Overall, we are still growing, but we are beginning to see some cautiousness reflected in our customers." (Wholesale Trade)
If you have 60 seconds, here is a little more:
Commodities Up in Price
Airfares; Fluorescent Lamps; Food and Beverage (3); Freight Charges; Lighting Supplies; Oil Products; Paper Products (2); Plywood; PVC Products; Software Maintenance; and Steel Products (2).
Commodities Down in Price
Carbon Pipe; Copper; Copper Pipe; Fuel; and Gasoline (5).
Commodities in Short Supply
No commodities are reported in short supply.
Note: The number of consecutive months the commodity is listed is indicated after each item.
If you have 2 whole minutes to give:
Employment activity in the non-manufacturing sector grew in October after one month of contraction, as ISM's Non-Manufacturing Employment Index registered 53.3 percent. This reflects an increase of 4.6 percentage points when compared to the 48.7 percent registered in September. Eight industries reported increased employment, seven industries reported decreased employment, and three industries reported unchanged employment compared to September. Comments from respondents include: "New positions being created and filled due to increase in business activity and expansion" and "Slowly adding back support staff — still 25 percent below high-water mark of June 2008."
The industries reporting an increase in employment in October — listed in order — are: Management of Companies & Support Services; Mining; Retail Trade; Transportation & Warehousing; Information; Educational Services; Other Services; and Professional, Scientific & Technical Services. The industries reporting a reduction in employment in October — listed in order — are: Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Finance & Insurance; Public Administration; Construction; Accommodation & Food Services; and Health Care & Social Assistance.
BMP Note: I did some reading about the current the employment situation as mentioned in this report, in the hopes that I could get more detail about why respondents' comments on employment suggest optimism and improvement while all of the other feedback seems to reflect concern - or at least uncertainty. What I can say for now is that employment can be looked at in several ways as an economic indicator. Average weekly jobless claims for unemployment insurance (as reported by the Conference Board) is a leading indicator, meaning that it changes either up or down before the rest of the economy experiences the same shift. On the other hand, Average duration of unemployment is a lagging indicator (changes directionally after the rest of the economy) and the number of employees on non-agricultural payrolls is a coincidental indicator, meaning that it changes at the same time as the rest of the economy. If you would like to read more about Economic Indicators, you can click here. I'm also planning to read the October Economic Situation Summary Report from the Bureau of Labor Statistics when it is released tomorrow.
About the ISM "Report on Business":
There are two primary indices in the report:
- PMI: the Procurement Managers’ Index (manufacturing sector only)
- NMI: The Non Manufacturing Index
Both of the indexes are composite indexes, which means they are comprised of multiple indexes. All of the data for the report is qualitative, based on responses of ‘Better’, ‘Same’, or ‘Worse’ to a series of monthly questions by a confidential panel of procurement managers.
Each index is reported as a percentage. A percentage above 50% means that the outlook is generally positive, below 50% is generally negative. What matters more than the percentages themselves is the trend up or down over time.
While the index that attracts the most overall attention in the report is the PMI, procurement professionals may actually find the NMI to be more directly applicable to their open projects. The NMI covers the non-manufacturing sector of the economy: roughly 80% of GDP.