ISM Non-Manufacturing NMI is 57.3% for February 2012

The February 2012 ISM Non-manufacturing report shows the overall index increased +0.5 to 57.3%. The NMI is also referred to as the services index, or service sector index.

 

 

New orders increased 1.8 percentage points to 61.2% but prices, now at 68.4%, increased 4.9 percentage points. Inventories also increased 6.5 percentage points, to 53.5% and from contraction to growing. Oil prices are a concern as illustrated by a quote from Educational Services:

Bracing for impact of fuel price increases on delivered commodity prices.

Below is a copy of the ISM services table, abbreviated.

 

ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE FEBRUARY 2012
Index Series
Index
February
Series
Index
January
Percent
Point
Change
Direction Rate
of
Change
Trend
(Months)
NMI 57.3 56.8 +0.5 Growing Faster 26
Business Activity/Production 62.6 59.5 +3.1 Growing Faster 31
New Orders 61.2 59.4 +1.8 Growing Faster 31
Employment 55.7 57.4 -1.7 Growing Slower 2
Supplier Deliveries 49.5 51.0 -1.5 Faster From Slower 1
Inventories 53.5 47.0 +6.5 Growing From Contracting 1
Prices 68.4 63.5 +4.9 Increasing Faster 31
Backlog of Orders 53.0 49.5 +3.5 Growing From Contracting 1
New Export Orders 54.5 56.5 -2.0 Growing Slower 7
Imports 52.0 55.0 -3.0 Growing Slower 3
Inventory Sentiment 61.5 58.5 +3.0 Too High Faster 177

 

Below is the graph for the non-manufacturing ISM business activity index, or current conditions, what we're doin' now meter. Business activity increased +3.1 percentage points to 62.6%, with real estate, over favorite walking Zombie, leading the pack. I imagine processing all of those foreclosures and short sales keeps residential real estate busy.

The 14 non-manufacturing industries reporting growth in February — listed in order — are: Real Estate, Rental & Leasing; Educational Services; Wholesale Trade; Other Services; Transportation & Warehousing; Finance & Insurance; Construction; Arts, Entertainment & Recreation; Public Administration; Accommodation & Food Services; Utilities; Professional, Scientific & Technical Services; Mining; and Information. The three industries reporting contraction in February are: Management of Companies & Support Services; Retail Trade; and Health Care & Social Assistance.

 

 

New orders increased, and generally 50% is the inflection point between expansion and contraction. New orders are an indicator of future business activity,

 

 

The employment index droped -1.7 points to 55.7%. Anything below 50 means contraction or in the case of workers, firing people. The below graph has been normalized to 50, the ISM inflection point for expansion versus contraction. The unemployment report will be out on Friday.

 

 

Below are supplier deliveries or vendor supplies and it's how fast businesses are getting their stuff to make more stuff. Above 50 is a slow down, which is opposite how many of these sub-indices are defined. Slow-downs mean more demand and also can limit the ability of that business to produce, or business activity. No stuff to make more stuff and you're stuck. This month the index decreased -1.5 percentage points to 49.5, and moved from slower to faster.

 

 

Prices paid by the services sector jumped +4.9 percentage points to 68.4%. Below is the order list of increased prices:

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

 

 

Order backlogs moved to expansion, a 3.5 percentage point increase to 53%. Order backlogs had been in contraction for 4 months. Construction led the pack in order backlogs.

 

 

The big story is inventories, which moved from contraction to expansion with a whopping 6.5 percentage point jump to 55%. Leading the inventory jump pack is again Real Estate.

The 10 industries reporting an increase in inventories in February — listed in order — are: Real Estate, Rental & Leasing; Management of Companies & Support Services; Utilities; Mining; Professional, Scientific & Technical Services; Construction; Wholesale Trade; Transportation & Warehousing; Accommodation & Food Services; and Public Administration. The two industries reporting decreases in inventories in February are: Health Care & Social Assistance; and Information.

Interesting inventories are increasing for real estate after the mortgage fraud settlement predicts a glut of more foreclosures. 27% of those surveyed do not have or monitor inventories.

 

 

Export orders, or new orders from overseas decreased -2.0 percentage points to 54.5%, although use of import materials for their businesses decreased -3.0 percentage points to 52%. These numbers are iffy for only 33% track exports and 42% track whether their materials are imported or not.

The NMI is made up of: Business Activity, New Orders, Employment and Supplier Deliveries, all equally weighted.

To read more sub-indices and details see the actual report (although no eye candy from the ISM).

The manufacturing ISM overview for February is here.

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