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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. "The NMI registered 53 percent in September, 0.3 percentage point lower than the 53.3 percent registered in August, and indicating continued growth at a slightly slower rate in the non-manufacturing sector. According to the NMI, nine non-manufacturing industries reported growth in September. Respondents' comments reflect an uncertainty about future business conditions and the direction of the economy."

If you only have 30 seconds, here is what you should know about this month’s report:

WHAT RESPONDENTS ARE SAYING ...

  • "Weak consumer confidence and high gas prices are placing downward pressure on retail sales volume." (Information)
  • "Business volume outlook and confidence across many market areas in North America appear to be softening." (Mining)
  • "It appears everyone is waiting to see what happens next. No trust in the economy or the federal government to do what is needed." (Accommodation & Food Services)
  • "The 2012 outlook is not optimistic; though we keep hoping for a rebound, we see little sign of an improved economy — nothing at least that will spur growth, investment or expansion. Improved investment performance in early 2011 caused us to begin several large capital projects, and although we have broken ground, we cannot help but question if our timing was right." (Educational Services)
  • "Third and fourth quarters appear to be slowing down in order volumes. Uncertainty over U.S. and European economy is causing clients to hold off on new orders." (Professional, Scientific & Technical Services)
  • "Negative forecast for housing market's future leads us to think we will be at current levels of business at best for the foreseeable future." (Wholesale Trade)

 

If you have 60 seconds, here is a little more:

Commodities Up in Price

Asphalt Products; Beef; Cleaning Supplies; Construction Services; Copper Wire; #1 Diesel Fuel* (2); #2 Diesel Fuel (15); Food and Beverage (2); Fuel (21); Labor; Lamps; Latex Gloves (2); Light Bulbs; Paper Products; Plastic Products; Steel Products; and Tires.

Commodities Down in Price

#1 Diesel Fuel* (2); Gasoline (4); and Natural Gas.

Commodities in Short Supply

#2 Diesel Fuel is the only commodity reported in short supply.

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

BMP Comment: The uncertainty expressed by Mr. Nieves as well as the survey respondents themselves seems to be particularly reflected in the fuel-related commodities: #1 Diesel Fuel, #2 Diesel Fuel, Fuel (no further distinctions given) and Gasoline. Prices of #1 Diesel Fuel were reported as both up and down for at least the last two months and #2 Diesel Fuel is the one commodity reported as being in short supply. If you aren't familiar with diesel fuel and its impact on transportation and delivery costs, you will want to know which of those commodities to follow.

#1 Diesel fuel (also known as No. 1 Fuel Oil and No. 1 Distillate) includes kerosene, range oil and jet and rocket fuel. (If your prices include rocket fuel, I think we've hit on another way to save your company money - even if your delivery times are a little slower.) Clearly this affects some companies/industries as it is included in the ISM report, but most of us don't have to worry about this.

#2 Diesel Fuel (also known as No. 2 Fuel Oil and No. 2 Distillate) includes both home heating oil and truck diesel. This is the one you will want to follow with regard to the delivery of goods not traveling via rocket. There is a seasonality to this fuel that may be in play here, as cited in the following explanation by the U.S. Energy Information Administration:

While U.S. diesel fuel demand is fairly consistent and generally reflects the overall health of the economy, there is often a seasonal aspect to diesel fuel price movements. During the fall and winter, diesel fuel prices are affected by the demand for heating oil. Heating oil and diesel fuel make up the product category "distillate fuel." They are closely related products, with the main difference being that diesel fuel has lower sulfur content than heating oil. As a result, diesel and heating oil are produced together, and seasonal increases in heating oil demand can put pressure on the diesel fuel market as well. In some regions, diesel fuel prices can also be influenced by seasonal swings in demand for diesel fuel used by farmers.


If you have 2 whole minutes to give:

Prices paid by non-manufacturing organizations for purchased materials and services increased at a slower rate in September. ISM's Non-Manufacturing Prices Index for September registered 61.9 percent, 2.3 percentage points lower than the 64.2 percent reported in August. In September, the percentage of respondents reporting higher prices is 24 percent, the percentage indicating no change in prices paid is 69 percent, and 7 percent of the respondents reported lower prices.

Thirteen non-manufacturing industries reported an increase in prices paid, in the following order: Utilities; Agriculture, Forestry, Fishing & Hunting; Educational Services; Arts, Entertainment & Recreation; Other Services; Construction; Accommodation & Food Services; Professional, Scientific & Technical Services; Retail Trade; Public Administration; Wholesale Trade; Finance & Insurance; and Health Care & Social Assistance. The three industries reporting a decrease in prices paid are: Information; Transportation & Warehousing; and Mining.

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.