NMI at 54.3%

Economic activity in the non-manufacturing sector grew in July for the seventh consecutive month, 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 54.3 percent in July, 0.5 percentage point higher than the 53.8 percent registered in June, indicating continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index decreased 0.7 percentage point to 57.4 percent, reflecting growth for the eighth consecutive month. The New Orders Index increased 2.3 percentage points to 56.7 percent, and the Employment Index increased 1.2 percentage points to 50.9 percent, reflecting growth after one month of contraction. The Prices Index decreased 1.1 percentage points to 52.7 percent in July, indicating that prices are still increasing but at a slower rate than in June. According to the NMI, 13 non-manufacturing industries reported growth in July. Respondents' comments are mixed. They vary by industry and company, with a tilt toward cautious optimism about business conditions."

INDUSTRY PERFORMANCE (Based on the NMI)

The 13 industries reporting growth in July based on the NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Information; Other Services; Transportation & Warehousing; Public Administration; Mining; Health Care & Social Assistance; Educational Services; and Wholesale Trade. The four industries reporting contraction in July are: Construction; Utilities; Accommodation & Food Services; and Finance & Insurance.

WHAT RESPONDENTS ARE SAYING ...

"Our business conditions continue to dramatically outpace last year's." (Information)

"Although unemployment remains high, consumer attitude has improved and translates into higher activity levels for us." (Arts, Entertainment & Recreation)

"Capital funding remains tight." (Accommodation & Food Services)

"Concerning forecasts and the instability in markets are continuing our focus on cautiousness." (Retail Trade)

"We continue to see signs of improvement and a slow jobless recovery. We are also seeing a one-time windfall of business as a result of the disaster in the Gulf." (Management of Companies & Support Services)

ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE

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

Commodities Up in Price

Beef (4); Cable Products; Carbon Pipe; Coated Groundwood; Corrugated Products (5); #2 Diesel Fuel; Freight Charges; Fuel (7); Gasoline; Labor; Pharmacy Products; and Telecom Products.

Commodities Down in Price

Soy Oil; and Telecom Services.

Commodities in Short Supply

Coated Freesheet; and Coated Groundwood.

Note: The number of consecutive months the commodity is listed is indicated after each item.

JULY 2010 NON-MANUFACTURING INDEX SUMMARIES

NMI (Non-Manufacturing Index)

In July, the NMI registered 54.3 percent, indicating continued growth in the non-manufacturing sector for the seventh consecutive month. 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.

Business Activity

ISM's Non-Manufacturing Business Activity Index in July registered 57.4 percent, a decrease of 0.7 percentage point when compared to the 58.1 percent registered in June. Thirteen industries reported increased business activity, and four industries reported decreased activity for the month of July. One industry reported no change from June. Comments from respondents include: "Seasonal, plus more consumer confidence" and "Economy seems to be recovering."

The industries reporting growth of business activity in July — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Educational Services; Other Services; Information; Transportation & Warehousing; Public Administration; Accommodation & Food Services; Health Care & Social Assistance; and Finance & Insurance. The industries reporting decreased business activity in July are: Construction; Wholesale Trade; Professional, Scientific & Technical Services; and Mining.

New Orders

ISM's Non-Manufacturing New Orders Index grew in July for the 11th consecutive month. The index registered 56.7 percent, which is an increase of 2.3 percentage points from the 54.4 percent reported in June. Comments from respondents include: "Business is up slightly" and "New capital projects."

The 12 industries reporting growth of new orders in July — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Retail Trade; Management of Companies & Support Services; Other Services; Information; Health Care & Social Assistance; Educational Services; Public Administration; and Finance & Insurance. The five industries reporting contraction of new orders in July are: Construction; Wholesale Trade; Accommodation & Food Services; Professional, Scientific & Technical Services; and Mining.

Employment

Employment activity in the non-manufacturing sector grew in July for second time in the past three months, and the second time since December 2007. ISM's Non-Manufacturing Employment Index for July registered 50.9 percent. This reflects an increase of 1.2 percentage points when compared to the 49.7 percent registered in June. Nine industries reported increased employment, four industries reported decreased employment, and five industries reported unchanged employment compared to June. Comments from respondents include: "Project team additions"; "Increased demand for services"; and "Expanding scope of business."

The industries reporting an increase in employment in July — listed in order — are: Information; Management of Companies & Support Services; Wholesale Trade; Arts, Entertainment & Recreation; Other Services; Professional, Scientific & Technical Services; Retail Trade; Public Administration; and Transportation & Warehousing. The industries reporting a reduction in employment in July are: Educational Services; Utilities; Finance & Insurance; and Health Care & Social Assistance.

Supplier Deliveries

The Supplier Deliveries Index registered 52 percent in July, 1 percentage point lower than the 53 percent registered in June, indicating that supplier deliveries continued to slow in July. A reading above 50 percent indicates slower deliveries.

The four industries reporting slower deliveries in July are: Mining; Construction; Wholesale Trade; and Transportation & Warehousing. The only industry reporting faster supplier deliveries in July is Accommodation & Food Services.

Inventories

ISM's Non-Manufacturing Inventories Index registered 55.5 percent in July, indicating that inventory levels grew in July for the fourth consecutive month. Of the total respondents in July, 28 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Better oversight of inventory by staff"; "Working inventory down"; and "Problems securing credit to purchase inventory."

The 11 industries reporting an increase in inventories in July — listed in order — are: Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Mining; Other Services; Utilities; Information; Health Care & Social Assistance; Retail Trade; Accommodation & Food Services; Wholesale Trade; and Professional, Scientific & Technical Services. The six industries reporting decreases in inventories in July — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Construction; Finance & Insurance; Public Administration; and Management of Companies & Support Services.

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in July, but at a slower rate than in June. ISM's Non-Manufacturing Prices Index for July registered 52.7 percent, 1.1 percentage points lower than the 53.8 percent reported in June. In July, the percentage of respondents reporting higher prices is 21 percent, the percentage indicating no change in prices paid is 71 percent, and 8 percent of the respondents reported lower prices.

In July, nine industries reported an increase in prices paid, in the following order: Construction; Accommodation & Food Services; Transportation & Warehousing; Professional, Scientific & Technical Services; Utilities; Health Care & Social Assistance; Retail Trade; Information; and Public Administration. The four industries reporting prices as decreasing for the month of July are: Management of Companies & Support Services; Mining; Wholesale Trade; and Finance & Insurance.

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew in July for the third consecutive month. The index registered 52 percent, 3.5 percentage points lower than the 55.5 percent reported in June. Of the total respondents in July, 47 percent indicated they do not measure backlog of orders.

The five industries reporting an increase in order backlogs in July are: Real Estate, Rental & Leasing; Transportation & Warehousing; Accommodation & Food Services; Finance & Insurance; and Professional, Scientific & Technical Services. The three industries reporting lower backlog of orders in July are: Construction; Mining; and Health Care & Social Assistance.

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 grew in July after one month of contraction. The New Export Orders Index for July registered 52 percent, which is 4 percentage points higher than the 48 percent registered in June. Of the total respondents in July, 69 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The four industries reporting an increase in new export orders in July are: Arts, Entertainment & Recreation; Professional, Scientific & Technical Services; Transportation & Warehousing; and Information. The three industries reporting a decrease in export orders in July are: Mining; Agriculture, Forestry, Fishing & Hunting; and Wholesale Trade.

Imports

The ISM Non-Manufacturing Imports Index contracted for the second consecutive month in July. The index registered 48 percent, which is the same percentage reported in June. In July, 61 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The three industries reporting an increase in the use of imports in July are: Arts, Entertainment & Recreation; Other Services; and Accommodation & Food Services. The five industries reporting a decrease in imports for the month of July are: Educational Services; Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Retail Trade; and Wholesale Trade.

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in July registered 59 percent. This is the same percentage reported in June, indicating that respondents believe their inventories are too high at this time. In July, 27 percent of respondents said their inventories were too high, 9 percent said their inventories were too low, and 64 percent said their inventories were about right.

The nine industries reporting a feeling that their inventories are too high in July — listed in order — are: Finance & Insurance; Management of Companies & Support Services; Mining; Arts, Entertainment & Recreation; Accommodation & Food Services; Professional, Scientific & Technical Services; Information; Health Care & Social Assistance; and Wholesale Trade. The two industries reporting that inventories are too low in July are: Transportation & Warehousing; and Agriculture, Forestry, Fishing & Hunting.