ISM Non-Manufacturing: Continued Growth in June
The Institute of Supply Management (ISM) has now released the June Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 57.4 percent, up 0.5 from 56.9 last month. Today's number came in above the Investing.com forecast of 56.5 percent.
Here is the report summary:
"The NMI® registered 57.4 percent, which is 0.5 percentage point higher than the May reading of 56.9 percent. This represents continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index increased to 60.8 percent, 0.1 percentage point higher than the May reading of 60.7 percent, reflecting growth for the 95th consecutive month, at a slightly faster rate in June. The New Orders Index registered 60.5 percent, 2.8 percentage points higher than the reading of 57.7 percent in May. The Employment Index decreased 2 percentage points in June to 55.8 percent from the May reading of 57.8 percent. The Prices Index increased 2.9 percentage points from the May reading of 49.2 percent to 52.1 percent, indicating prices increased in June after decreasing in May. According to the NMI®, 16 non-manufacturing industries reported growth. The non-manufacturing sector continued to reflect strength for the month of June. The majority of respondents’ comments are 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 60.8 percent is up 0.1 percent from a seasonally adjusted 60.7 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 visualize 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.