The non-manufacturing ISM surveys nearly 400 firms from 60 sectors across the United States, including agriculture, mining, construction, transportation, communications, wholesale trade and retail trade. Beginning with the January 2008 report, a new composite index was made public and is now the headline number. It is considered an indicator of the overall economic conditions for the non-manufacturing sector and consists of four equally weighted indexes: business activity, new orders, employment, and supplier deliveries. Why Investors Care
| Released on 2/5/08 For Jan 2008 | ||||||||||||
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Highlights
In very unusual and troubling results, the ISM's non-manufacturing business activity index plunged to 41.9 in January from 54.4 in December. This is the most extreme move on record and the lowest reading since the 2001 recession. The ISM moved up the time of the report to 8:55 a.m. ET, perhaps reflecting the enormous move or, according to this morning's chatter in the financial markets, because an ISM representative publicly referred to the results yesterday.
The report also marks the debut of a composite index, which came in not much better at 44.6. Composite indexes have the virtue of reducing volatility, though in essence they tend to squeeze together forward indicators, such as new orders, with lagging indicators, such as production. Either way you slice it, the results are poor.
New orders, arguably the report's most important reading headline or otherwise, plunged to 43.5 from 53.9 -- again the lowest reading since the recession. Backlogs fell 3 points to 46.0 in more bad news. Export orders however are still above water, up 2 points to 52.0 and reflecting strong global demand and the competitive advantage of a weak currency. But import orders show the weakness in the nation's economy, down to 41.5 from 50.5 as non-manufacturers are curtailing purchases from their foreign suppliers.
Employment also fell through the floor, down nearly 8 points to 43.9, the lowest reading since the very beginning of the expansion and one certain to deepen concern over the jobs market. Inventories understandably fell back and fewer purchasers reported delivery delays. Finally prices continue to show pressure, at 70.7 vs. 71.5. Perhaps prices will begin to recede in line with demand, which is of course the hope of the Federal Reserve.
This is an alarming report that raises the question, like Friday's jobs data, whether the economy has already entered a recession. There was surprisingly limited initial reaction to the report, which however is likely to push down Treasury yields, the dollar, along with stocks.
The business activity index from the ISM non-manufacturing survey was mostly steady and moderately healthy in December though it did slip to 53.9 from 54.1 in November. December's orders numbers point to another healthy number for January. New orders in December rebounded from a dip in the prior month to show a respectable 53.5 level.
Business activity index Consensus Forecast for January 08: 53.0
Range: 51.0 to 54.0
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Beginning with the January 2008 report, a new composite index was made public and is now the headline number. It is considered an indicator of the overall economic conditions for the non-manufacturing sector and consists of four equally weighted indexes: business activity, new orders, employment, and supplier deliveries. |
| 2008 Release Schedule | ||||||||||||||||||||||||||
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