NMI at 51.5%

Business Activity Index at 54.4%

New Orders Index at 52.4%

Employment Index at 48.2%

Economic activity in the non-manufacturing sector grew in August for the eighth 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 51.5 percent in August, 2.8 percentage points lower than the 54.3 percent registered in July, indicating continued growth in the non-manufacturing sector but at a slower rate. The Non-Manufacturing Business Activity Index decreased 3 percentage points to 54.4 percent, reflecting growth for the ninth consecutive month, but at a slower rate than in July. The New Orders Index decreased 4.3 percentage points to 52.4 percent, and the Employment Index decreased 2.7 percentage points to 48.2 percent, reflecting contraction after one month of growth. The Prices Index increased 7.6 percentage points to 60.3 percent in August, indicating that prices increased significantly in July. According to the NMI, nine non-manufacturing industries reported growth in August. Respondents' comments continue to be mixed about business conditions and the state of the overall economy."

INDUSTRY PERFORMANCE (Based on the NMI)

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

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

Commodities Up in Price

Bacon; Beef (5); Butter; Chicken; Coated Groundwood (2); Dairy; Diesel Fuel; #2 Diesel Fuel (2); Freight Charges (2); Fuel (8); Gasoline (2); Linen; Pharmacy Products (2); Pork; and Transportation Costs.

Commodities Down in Price

No commodities are reported down in price.

Commodities in Short Supply

Coated Groundwood (2) is the only commodity reported in short supply.

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

AUGUST 2010 NON-MANUFACTURING INDEX SUMMARIES

NMI (Non-Manufacturing Index)

In August, the NMI registered 51.5 percent, indicating continued growth in the non-manufacturing sector for the eighth 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.

ISM's Non-Manufacturing Business Activity Index in August registered 54.4 percent, a decrease of 3 percentage points when compared to the 57.4 percent registered in July. Seven industries reported increased business activity, and six industries reported decreased activity for the month of August. Five industries reported no change from July. Comments from respondents include: "Spend trending up in services and technology" and "Orders delayed or cancelled; loss of orders due to pricing pressures."

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

New Orders

ISM's Non-Manufacturing New Orders Index grew in August for the 12th consecutive month. The index registered 52.4 percent, which is a decrease of 4.3 percentage points from the 56.7 percent reported in July. Comments from respondents include: "More requisitions for goods and services" and "Summer slowdown and sluggish economy."

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

Employment

Employment activity in the non-manufacturing sector contracted in August after growing in July. July represented the second time in the past four months, and only the second time since December 2007, that the index has expanded. ISM's Non-Manufacturing Employment Index for August registered 48.2 percent. This reflects a decrease of 2.7 percentage points when compared to the 50.9 percent registered in July. Three industries reported increased employment, 10 industries reported decreased employment, and five industries reported unchanged employment compared to July. Comments from respondents include: "Planned downsizing due to changing business model" and "Holding the line on no new hires."

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

Supplier Deliveries

The Supplier Deliveries Index registered 51 percent in August, 1 percentage point lower than the 52 percent registered in July, indicating that supplier deliveries continued to slow in August. A reading above 50 percent indicates slower deliveries.

The seven industries reporting slower deliveries in August — listed in order — are: Real Estate, Rental & Leasing; Educational Services; Construction; Other Services; Information; Transportation & Warehousing; and Finance & Insurance. The three industries reporting faster supplier deliveries in August are: Utilities; Professional, Scientific & Technical Services; and Public Administration.

Inventories

ISM's Non-Manufacturing Inventories Index registered 53.5 percent in August, indicating that inventory levels grew in August for the fifth consecutive month. Of the total respondents in August, 26 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Improved inventory management practices" and "Investing to meet short-term increase."

The nine industries reporting an increase in inventories in August — listed in order — are: Real Estate, Rental & Leasing; Mining; Arts, Entertainment & Recreation; Wholesale Trade; Health Care & Social Assistance; Accommodation & Food Services; Construction; Utilities; and Finance & Insurance. The five industries reporting decreases in inventories in August are: Transportation & Warehousing; Retail Trade; Management of Companies & Support Services; Professional, Scientific & Technical Services; and Information.

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in August at a significantly faster rate than in July. ISM's Non-Manufacturing Prices Index for August registered 60.3 percent, 7.6 percentage points higher than the 52.7 percent reported in July. In August, the percentage of respondents reporting higher prices is 19 percent, the percentage indicating no change in prices paid is 77 percent, and 4 percent of the respondents reported lower prices.

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

Backlog of Orders

ISM's Non-Manufacturing Backlog of Orders Index grew in August for the fourth consecutive month. The index registered 50.5 percent, 1.5 percentage points lower than the 52 percent reported in July. Of the total respondents in August, 45 percent indicated they do not measure backlog of orders.

The six industries reporting an increase in order backlogs in August — listed in order — are: Construction; Transportation & Warehousing; Health Care & Social Assistance; Accommodation & Food Services; Wholesale Trade; and Public Administration. The seven industries reporting lower backlog of orders in August — listed in order — are: Utilities; Mining; Other Services; Professional, Scientific & Technical Services; Retail Trade; Information; and Finance & Insurance.

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 contracted in August after one month of growth. The New Export Orders Index for August registered 46.5 percent, which is 5.5 percentage points lower than the 52 percent registered in July. Of the total respondents in August, 67 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 August are: Construction; Other Services; Finance & Insurance; and Accommodation & Food Services. The four industries reporting a decrease in export orders in August are: Mining; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; and Wholesale Trade.

Imports

The ISM Non-Manufacturing Imports Index grew in August after two consecutive months of contraction. The index registered 50.5 percent, which is 2.5 percentage points higher than the 48 percent reported in July. In August, 60 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The two industries reporting an increase in the use of imports in August are: Information; and Accommodation & Food Services. The two industries reporting a decrease in imports for the month of August are: Agriculture, Forestry, Fishing & Hunting; and Retail Trade. Thirteen industries reported no change for the month of August.

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in August registered 60 percent, which is 1 percentage point higher than the 59 percent reported in July. This indicates that respondents believe their inventories are too high at this time. In August, 27 percent of respondents said their inventories were too high, 7 percent said their inventories were too low, and 66 percent said their inventories were about right.

The eight industries reporting a feeling that their inventories are too high in August — listed in order — are: Mining; Arts, Entertainment & Recreation; Accommodation & Food Services; Finance & Insurance; Information; Professional, Scientific & Technical Services; Wholesale Trade; and Health Care & Social Assistance. No industries reported that inventories are too low in August.

About this Report

The data presented herein is obtained from a survey of non-manufacturing supply managers based on information they have collected within their respective organizations. ISM makes no representation, other than that stated within this release, regarding the individual company data collection procedures. Use of the data is in the public domain and should be compared to all other economic data sources when used in decision-making.