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 59.1 percent, up 0.5 from 58.6 last month. Today's number came in above the Investing.com forecast of 58.3 percent.
Here is the report summary:
“The NMI® registered 59.1 percent, which is 0.5 percentage point higher than the May reading of 58.6 percent. This represents continued growth in the non-manufacturing sector at a slightly faster rate. The Non-Manufacturing Business Activity Index increased to 63.9 percent, 2.6 percentage points higher than the May reading of 61.3 percent, reflecting growth for the 107th consecutive month, at a faster rate in June. The New Orders Index registered 63.2 percent, 2.7 percentage points higher than the reading of 60.5 percent in May. The Employment Index decreased 0.5 percentage point in June to 53.6 percent from the May reading of 54.1 percent. The Prices Index decreased by 3.6 percentage points from the May reading of 64.3 percent to 60.7 percent, indicating that prices increased in June for the 28th consecutive month. According to the NMI®, 17 non-manufacturing industries reported growth. Respondents continue to be optimistic about business conditions and the overall economy. There is a continuing concern relating to tariffs, capacity constraints and delivery.” [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 63.9 percent is up 2.6 from a seasonally adjusted 61.3 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.
We will publish our next ISM Non-Manufacturing report on August 3.