NMI® at 59.7%; February Non-Manufacturing ISM® Report On Business®

Business Activity Index at 64.7%; New Orders Index at 65.2%; Employment Index at 55.2%

TEMPE, Ariz., March 5, 2019 /PRNewswire/ -- Economic activity in the non-manufacturing sector grew in February for the 109th consecutive month, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM^® Report On Business^®.

The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management^® (ISM^®) Non-Manufacturing Business Survey Committee: "The NMI^® registered 59.7 percent, which is 3 percentage points higher than the January reading of 56.7 percent. This represents continued growth in the non-manufacturing sector, at a faster rate. The Non-Manufacturing Business Activity Index increased to 64.7 percent, 5 percentage points higher than the January reading of 59.7 percent, reflecting growth for the 115th consecutive month, at a faster rate in February. The New Orders Index registered 65.2 percent, 7.5 percentage points higher than the reading of 57.7 percent in January. The Employment Index decreased 2.6 percentage points in February to 55.2 percent from the January reading of 57.8 percent. The Prices Index decreased 5 percentage points from the January reading of 59.4 percent to 54.4 percent, indicating that prices increased in February for the 21st consecutive month. According to the NMI^®, all 18 non-manufacturing industries reported growth. The non-manufacturing sector's growth rate rebounded in February after cooling off in January. Respondents are concerned about the uncertainty of tariffs, capacity constraints and employment resources; however, they remain mostly optimistic about overall business conditions and the economy."

INDUSTRY PERFORMANCE

The 18 non-manufacturing industries reporting growth in February — listed in order — are: Transportation & Warehousing; Management of Companies & Support Services; Wholesale Trade; Mining; Educational Services; Utilities; Other Services; Real Estate, Rental & Leasing; Construction; Health Care & Social Assistance; Professional, Scientific & Technical Services; Public Administration; Agriculture, Forestry, Fishing & Hunting; Finance & Insurance; Information; Accommodation & Food Services; Arts, Entertainment & Recreation; and Retail Trade.

WHAT RESPONDENTS ARE SAYING

• "We are anxiously awaiting decisions in the next couple of weeks on the fate of the proposed tariffs on China. High Chinese commitments to agriculture output will put cost pressure on food and restaurant margins." (Accommodation & Food Services)
• "The beginning of the year is generally our slowest time of year in the health-care industry. [Activity] will gradually pick up until April, then be steady until the fourth quarter, when there will be a large increase." (Health Care & Social Assistance)
• "Still strong in all areas, due mostly to commercial construction activity." (Construction)
• "The local economy is doing well. Business lending remains competitive. The rise in interest rates have helped boost our net interest margin." (Finance & Insurance)
• "Business continues to stay steady, with little drop off. However, we are more concerned about tariffs in the short term, since there seems to be no agreement. However, we do believe it will be a short-lived issue. In the long term, tariffs will force our suppliers to source elsewhere, which will levy more competition from manufacturers in other low- or non-tariffed countries and even in the U.S. Ultimately, the tariffs will force an improvement to the overall supply chain and better mitigate supply risk in our industry." (Management of Companies & Support Services)
• "Increased activity level over the end of 2018." (Mining)
• "Business continues [to] improve, and we expect it to continue through 2019. Domestic trucking availability is improving." (Other Services)
• "Confidence is returning in the marketplace, but tariff surcharges are still in place." (Retail Trade)
• "Tariffs continue to have an impact on our business. The contractor labor shortage continues to be the biggest supply challenge for our company and others in our region and industry." (Utilities)
• "Seeing increases in business activity. Projecting strong sales for the month, stable prices and generally good fill rates from suppliers. Some spot outages, mostly due to capacity and planning limitations or shortfalls." (Wholesale Trade)

*Non-Manufacturing ISM^® Report On Business^® data is seasonally adjusted for the Business Activity, New Orders, Prices and Employment Indexes. Manufacturing ISM^® Report On Business^® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries Indexes.

**Number of months moving in current direction.

COMMODITIES REPORTED UP/DOWN IN PRICE, AND IN SHORT SUPPLY

Commodities Up in Price

Beef (2); Copper Wire; Labor (5); Paper; Paper Products; and Steel Products (17).

Commodities Down in Price

Cheese; Diesel (3); and Fuel (4).

Commodities in Short Supply

Construction Subcontractors (14); Labor (5); Labor — Construction (35); Labor — Temporary (6); and Medical Supplies (4).

Note: The number of consecutive months the commodity is listed is indicated after each item.

FEBRUARY 2019 NON-MANUFACTURING INDEX SUMMARIES

NMI^®

In February, the NMI^® registered 59.7 percent, 3 percentage points lower than the 56.7 percent registered in January, indicating continued growth in the non-manufacturing sector for the 109th consecutive month. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting.

An NMI^® above 48.6 percent, over time, generally indicates an expansion of the overall economy. Therefore, the February NMI^® indicates growth for the 115th consecutive month in the overall economy and expansion in the non-manufacturing sector for the 109th consecutive month. Nieves says, "The past relationship between the NMI^® and the overall economy indicates that the NMI^® for February (59.7 percent) corresponds to a 3.9-percent increase in real gross domestic product (GDP) on an annualized basis."

NMI^® HISTORY

Business Activity

ISM^®'s Business Activity Index registered 64.7 percent in February, an increase of 5 percentage points from the January reading of 59.7 percent. This represents growth in business activity for the 115th consecutive month. Sixteen industries reported increased business activity. Comments from respondents include: "Demand for medical supplies, equipment, services, professional services and construction are all up" and "Activity has picked up after a very sluggish first half of last month."

The 16 industries reporting growth of business activity in February — listed in order — are: Management of Companies & Support Services; Utilities; Transportation & Warehousing; Educational Services; Other Services; Mining; Real Estate, Rental & Leasing; Wholesale Trade; Public Administration; Accommodation & Food Services; Professional, Scientific & Technical Services; Arts, Entertainment & Recreation; Health Care & Social Assistance; Finance & Insurance; Information; and Construction. The only industry reporting a decrease in February is Retail Trade.

New Orders

ISM^®'s Non-Manufacturing New Orders Index registered 65.2 percent, an increase of 7.5 percentage points from the January reading of 57.7 percent. New orders grew in February for the 115th consecutive month, at a substantially faster rate compared with January. Comments from respondents include: "Increased activity in the oil and gas sector leading to trickle-down effect for service companies" and "Expanding business with our current customers."

The 16 industries reporting growth of new orders in February — listed in order — are: Transportation & Warehousing; Management of Companies & Support Services; Wholesale Trade; Mining; Utilities; Educational Services; Real Estate, Rental & Leasing; Construction; Public Administration; Health Care & Social Assistance; Professional, Scientific & Technical Services; Accommodation & Food Services; Information; Finance & Insurance; Other Services; and Retail Trade. No industry reported contraction in February.

Employment

Employment activity in the non-manufacturing sector grew in February for the 60th consecutive month. ISM^®'s Non-Manufacturing Employment Index registered 55.2 percent, a decrease of 2.6 percentage points from the January reading of 57.8 percent. Eleven industries reported increased employment, and four industries reported decreased employment. Comments from respondents include: "Lower employment makes higher-paying positions elsewhere more attractive" and "It is more difficult to find well-qualified workers. Our backlog of unfilled jobs is stubbornly the same despite the efforts of the HR department."

The 11 industries reporting an increase in employment in February — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Management of Companies & Support Services; Wholesale Trade; Educational Services; Real Estate, Rental & Leasing; Construction; Mining; Other Services; Finance & Insurance; and Health Care & Social Assistance. The four industries reporting a reduction in employment in February are: Accommodation & Food Services; Information; Retail Trade; and Public Administration.

Supplier Deliveries

Supplier deliveries were slower in February for the 38th consecutive month. The index registered 53.5 percent, which is 2 percentage points higher than the 51.5 percent registered in January. This indicates that deliveries are slowing at faster rate in February as compared with January. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: "Manufacturing back orders are slowing deliveries" and "General increase in U.S. economic activity is straining manufacturers already running at full capacity."

The seven industries reporting slower deliveries in February — listed in order — are: Transportation & Warehousing; Mining; Wholesale Trade; Retail Trade; Information; Professional, Scientific & Technical Services; and Health Care & Social Assistance. The three industries reporting faster deliveries in February are: Real Estate, Rental & Leasing; Construction; and Accommodation & Food Services. Eight industries reported no change in supplier deliveries in February as compared to January.

Inventories

ISM^®'s Non-Manufacturing Inventories Index grew in February after a month of contraction, registering 51 percent, which is 2 percentage points higher than the 49 percent that was reported in January. Of the total respondents in February, 30 percent indicated they do not have inventories or do not measure them. Comments from respondents include: "Support increase in volume" and "Carrying additional inventory to meet demand [due to] customer business increasing."

The six industries reporting an increase in inventories in February — listed in order — are: Real Estate, Rental & Leasing; Construction; Professional, Scientific & Technical Services; Other Services; Management of Companies & Support Services; and Finance & Insurance. The six industries reporting a decrease in inventories — listed in order — are: Utilities; Transportation & Warehousing; Retail Trade; Mining; Public Administration; and Wholesale Trade.

Prices

Prices paid by non-manufacturing organizations for materials and services increased in February for the 21st consecutive month. ISM^®'s Non-Manufacturing Prices Index registered 54.4 percent, 5 percentage points lower than the 59.4 percent reported in January. Eighteen percent of respondents reported higher prices, 74 percent indicated no change in prices paid, and 8 percent of respondents reported lower prices.

Twelve non-manufacturing industries reported an increase in prices paid during the month of February, listed in the following order: Arts, Entertainment & Recreation; Other Services; Wholesale Trade; Construction; Public Administration; Utilities; Health Care & Social Assistance; Information; Finance & Insurance; Management of Companies & Support Services; Transportation & Warehousing; and Professional, Scientific & Technical Services. The three non-manufacturing industries reporting a decrease in prices paid during the month of February are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; and Mining.

NOTE: Commodities reported as up in price and down in price are listed in the commodities section of this report.

Backlog of Orders

ISM^®'s Non-Manufacturing Backlog of Orders Index grew in February. The index registered 55.5 percent, which is 3 percentage points higher than the 52.5 percent reported in January. Of the total respondents in February, 38 percent indicated they do not measure backlog of orders.

The nine industries reporting an increase in order backlogs in February — listed in order — are: Utilities; Accommodation & Food Services; Retail Trade; Mining; Public Administration; Wholesale Trade; Transportation & Warehousing; Construction; and Professional, Scientific & Technical Services. The four industries that reported a decrease in backlogs in February are: Real Estate, Rental & Leasing; Finance & Insurance; Information; and Health Care & Social Assistance.

New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the U.S. by domestically based personnel grew for the 25th consecutive month. The New Export Orders Index registered 55 percent in February which is 4.5 percentage points higher than the 50.5 percent that was reported in January. Of the total respondents in February, 64 percent indicated they either do not perform, or do not separately measure, orders for work outside of the U.S.

The five industries reporting an increase in new export orders in February are: Real Estate, Rental & Leasing; Accommodation & Food Services; Wholesale Trade; Mining; and Information. The two industries reporting a decrease in exports for the month of February are: Other Services; and Finance & Insurance. Eight industries reported no change in exports in February.

Imports

The Imports Index contracted in February. The reading of 48.5 percent is 3.5 percentage points lower than the 52 percent reported in January. Fifty-one percent of respondents reported that they do not use, or do not track the use of, imported materials.

The three industries reporting an increase in imports for the month of February are: Mining; Wholesale Trade; and Retail Trade. The four industries reporting a decrease in imports in the month of February are: Public Administration; Information; Health Care & Social Assistance; and Professional, Scientific & Technical Services. Ten industries reported no change in imports in February as compared to January.

Inventory Sentiment

The ISM^® Non-Manufacturing Inventory Sentiment Index in February registered 59 percent, which is 1.5 percentage points lower than the 60.5 percent that was reported in January. This indicates that respondents believe their inventories are still too high. In February, 24 percent of respondents said their inventories were too high, 6 percent of the respondents said their inventories were too low, and 70 percent said their inventories were about right.

The nine industries reporting a feeling that their inventories were too high in February — listed in order — are: Wholesale Trade; Information; Construction; Professional, Scientific & Technical Services; Utilities; Public Administration; Management of Companies & Support Services; Mining; and Health Care & Social Assistance. The two industries reporting a feeling that their inventories were too low in February are: Transportation & Warehousing; and Accommodation & Food Services.

About This Report

DO NOT CONFUSE THIS NATIONAL REPORT with the various regional purchasing reports released across the country. The national report's information reflects the entire U.S., while the regional reports contain primarily regional data from their local vicinities. Also, the information in the regional reports is not used in calculating the results of the national report. The information compiled in this report is for the month of February 2019.

The data presented herein is obtained from a survey of non-manufacturing supply executives based on information they have collected within their respective organizations. ISM^® makes no representation, other than that stated within this release, regarding the individual company data collection procedures. The data should be compared to all other economic data sources when used in decision-making.

Data and Method of Presentation

The Non-Manufacturing ISM^® Report On Business^® is based on data compiled from purchasing and supply executives nationwide. Membership of the Non-Manufacturing Business Survey Committee is diversified by NAICS, based on each industry's contribution to gross domestic product (GDP). The Non-Manufacturing Business Survey Committee responses are divided into the following NAICS code categories: Agriculture, Forestry, Fishing & Hunting; Mining; Utilities; Construction; Wholesale Trade; Retail Trade; Transportation & Warehousing; Information; Finance & Insurance; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Management of Companies & Support Services; Educational Services; Health Care & Social Assistance; Arts, Entertainment & Recreation; Accommodation & Food Services; Public Administration; and Other Services (services such as Equipment & Machinery Repairing; Promoting or Administering Religious Activities; Grantmaking; Advocacy; and Providing Dry-Cleaning & Laundry Services, Personal Care Services, Death Care Services, Pet Care Services, Photofinishing Services, Temporary Parking Services, and Dating Services).

Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured (Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment and Supplier Deliveries), this report shows the percentage reporting each response and the diffusion index. Responses represent raw data and are never changed. Data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. All seasonal adjustment factors are subject annually to relatively minor changes when conditions warrant them. The remaining indexes have not indicated significant seasonality.

The NMI^® (Non-Manufacturing Index) is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. Diffusion indexes have the properties of leading indicators and are convenient summary measures showing the prevailing direction of change and the scope of change. An index reading above 50 percent indicates that the non-manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries Index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

An NMI^® above 48.6 percent, over time, indicates that the overall economy, or gross domestic product (GDP), is generally expanding; below 48.6 percent, it is generally declining. The distance from 50 percent or 48.6 percent is indicative of the strength of the expansion or decline.

The Non-Manufacturing ISM^® Report On Business^® survey is sent out to Non-Manufacturing Business Survey Committee respondents the first part of each month. Respondents are asked to ONLY report on information for the current month. ISM^® receives survey responses throughout most of any given month, with the majority of respondents generally waiting until late in the month to submit responses in order to give the most accurate picture of current business activity. ISM^® then compiles the report for release on the third business day of the following month.

The industries reporting growth, as indicated in the Non-Manufacturing ISM^® Report On Business^® monthly report, are listed in the order of most growth to least growth. For the industries reporting contraction or decreases, those are listed in the order of the highest level of contraction/decrease to the least level of contraction/decrease.

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About Institute for Supply Management^®

Institute for Supply Management^® (ISM^®) serves supply management professionals in more than 90 countries. Its 50,000 members around the world manage about US$1 trillion in corporate and government supply chain procurement annually. Founded in 1915 as the first supply management institute in the world, ISM is committed to advancing the practice of supply management to drive value and competitive advantage for its members, contributing to a prosperous and sustainable world. ISM leads the profession through the ISM Report On Business^®, its highly regarded certification programs and the ISM Mastery Model^®. This report has been issued by the association since 1931, except for a four-year interruption during World War II.

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The next Non-Manufacturing ISM^® Report On Business^® featuring the March 2019 data will be released at 10:00 a.m. ET on Wednesday, April 3, 2019.

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