ISM Non-Manufacturing: April Shows Improvement
Doug Short | May 06, 2014 01:37AM ET
Today the Institute for Supply Management published its latest Investing.com forecast of 54.1.
Here is the report summary:
"The NMI® registered 55.2 percent in April, 2.1 percentage points higher than March's reading of 53.1 percent. The Non-Manufacturing Business Activity Index increased substantially to 60.9 percent, which is 7.5 percentage points higher than the March reading of 53.4 percent, reflecting growth for the 57th consecutive month at a much faster rate. The New Orders Index registered 58.2 percent, 4.8 percentage points higher than the reading of 53.4 percent registered in March. The Employment Index decreased 2.3 percentage points to 51.3 percent from the March reading of 53.6 percent and indicates growth for the second consecutive month, but at a slower rate. The Prices Index increased 2.5 percentage points from the March reading of 58.3 percent to 60.8 percent, indicating prices increased at a faster rate in April when compared to March. According to the NMI®, 14 non-manufacturing industries reported growth in April. The majority of survey respondents' comments indicate that both business conditions and the economy are improving."
Like its much older kin, the ISM Manufacturing Series, I have been reluctant to focus on this collection of diffusion indexes. For one thing, there is relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.
In my view, the more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point at 60.9 percent is a 7.5 increase from the previous month.
For a diffusion index, this can be an extremely volatile indicator. Thus I've added a six-month moving average to assist us in visualizing the trend, which has been relatively range bound for the past two years, and we're currently at the bottom of the range.
Theoretically, I believe, this indicator will become more useful as the timeframe of its coverage expands. Manufacturing may be a more sensitive barometer than Non-Manufacturing activity, but we are increasingly a services-oriented economy, which explains my intention to keep this series on the radar.
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Here is a table showing trend in the underlying components.
Here is a link to my coverage of ISM Manufacturing report released last week.
Note : I use the FRED here .
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