The Institute of Supply Management (ISM) has released its December services purchasing managers' index (PMI). The headline composite index is at 54.1, better than the forecast of 53.5. The latest reading keeps the index in expansion territory for the sixth straight month.
Here is an excerpt from the report summary:
Miller continues, “The Services PMI® in December was boosted primarily by strength in the Business Activity and Supplier Deliveries indexes. Many industries noted that end-of-year and seasonal factors were helping drive business activity or impact inventory management. Some of the increased business activity seems to have been driven by preparation for demand in the new year, or risk management for impacts from ports strikes and potential tariffs. There was general optimism expressed across many industries, but tariff concerns elicited the most panelist comments.”
Here is a table showing the PMI's components.
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 the non-manufacturing composite.
The more interesting and useful sub-component is the non-manufacturing business activity Index. The latest data point for December is 58.2, up from 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.
ISM PMI Comparison: Manufacturing vs. Services
The next chart offers a comparison between the two Purchasing Managers' Indexes provided by the Institute for Supply Management. See the latest update on the Manufacturing PMI here.
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