ISM Non-Manufacturing: Growth Flat in December
The Institute of Supply Management (ISM) has now released the December Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 57.2 percent, unchanged from last month. Today's number came in above the Investing.com forecast of 56.6 percent.
Here is the report summary:
"The NMI® registered 57.2 percent in December, matching the November figure. This represents continued growth in the non-manufacturing sector at the same rate. The Non-Manufacturing Business Activity Index decreased to 61.4 percent, 0.3 percentage point lower than the November reading of 61.7 percent, reflecting growth for the 89th consecutive month, at a slightly slower rate in December. The New Orders Index registered 61.6 percent, 4.6 percentage points higher than the reading of 57 percent in November. The Employment Index decreased 4.4 percentage points in December to 53.8 percent from the November reading of 58.2 percent. The Prices Index increased 0.7 percentage point from the November reading of 56.3 percent to 57 percent, indicating prices increased in December for the ninth consecutive month at a slightly faster rate. According to the NMI®, 12 non-manufacturing industries reported growth in December. The non-manufacturing sector closed out the year strong maintaining its rate of growth month-over-month. Respondents' comments are mostly positive about business conditions and the overall economy." [Source]
Unlike its much older kin, the ISM Manufacturing Series, 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.
The more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point at 61.4 percent is down 0.3 percent from a seasonally adjusted 61.7 the previous month.
For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualizing the short-term trends.
Theoretically, this indicator should become more useful as the time frame 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 our intention to keep this series on the radar.
Here is a table showing the trend in the underlying components.