Wednesday the Institute for Supply Management published its latest Non-Manufacturing Report. The headline NMI Composite Index is at 56.5 percent, up 3.6 percent from last month's seasonally adjusted 52.9 percent. Today's number came in above the Investing.com forecast of 53.3 percent.
Here is the report summary:
"The NMI® registered 56.5 percent in June, 3.6 percentage points higher than the May reading of 52.9 percent. This represents continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index increased to 59.5 percent, 4.4 percentage points higher than the May reading of 55.1 percent, reflecting growth for the 83rd consecutive month, at a faster rate in June. The New Orders Index registered 59.9 percent, 5.7 percentage points higher than the reading of 54.2 percent in May. The Employment Index grew 3 percentage points in June after one month of contraction to 52.7 percent from the May reading of 49.7 percent. The Prices Index decreased 0.1 percentage point from the May reading of 55.6 percent to 55.5 percent, indicating prices increased in June for the third consecutive month. According to the NMI®, 15 non-manufacturing industries reported growth in June. Respondents’ comments are mostly positive about business conditions and the economy. Overall, the report reflects a strong rebound from the 'cooling-off' of the previous month for the non-manufacturing sector."
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 59.5 percent is up 4.4 from a seasonally adjusted 55.1 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 timeframe 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 trend in the underlying components.
