The ISM Non-manufacturing report for November 2011 shows the overall index decreased 0.9 to 52%, the lowest NMI since January 2010. This report is also referred to as the services index, or service sector index.
New orders increased +0.6 percentage points to 53.0% but Employment plunged -4.4 points to 48.9% and into contraction. The employment plunge is after one measly month of indicated growth. Most telling are the quotes from survey respondents. Statements like cannot find the pulse of the consumer, not enough quality borrowers to lend money to and this one, from Accommodation and Food services, tell the story.
We currently see no signs of a turnaround. Customers are nervous about the future of their jobs and incomes. Due to this fact, our sales are down and our need to hire more employees is, too.
This is what happens when one squeezes blood from the U.S. middle class stone, labor arbitrages them, represses their wages. The result is overall weak demand. Below is a copy of the ISM services table, abbreviated.
| ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE NOVEMBER 2011 | ||||||
|---|---|---|---|---|---|---|
| Index | Series Index November |
Series Index October |
Percent Point Change |
Direction | Rate of Change |
Trend (Months) |
| NMI | 52.0 | 52.9 | -0.9 | Growing | Slower | 24 |
| Business Activity/Production | 56.2 | 53.8 | +2.4 | Growing | Faster | 28 |
| New Orders | 53.0 | 52.4 | +0.6 | Growing | Faster | 28 |
| Employment | 48.9 | 53.3 | -4.4 | Contracting | From Growing | 1 |
| Supplier Deliveries | 50.0 | 52.0 | -2.0 | Unchanged | From Slowing | 1 |
| Inventories | 52.5 | 45.5 | +7.0 | Growing | From Contracting | 1 |
| Prices | 62.5 | 57.1 | +5.4 | Increasing | Faster | 28 |
| Backlog of Orders | 48.0 | 47.0 | +1.0 | Contracting | Slower | 2 |
| New Export Orders | 55.5 | 54.0 | +1.5 | Growing | Faster | 4 |
| Imports | 48.5 | 48.0 | +0.5 | Contracting | Slower | 3 |
| Inventory Sentiment | 63.0 | 57.5 | +5.5 | Too High | Faster | 174 |
Below is the graph for the non-manufacturing ISM business activity index, or current conditions, what we're doin' now meter. Business activity increased 2.4 percentage points to 56.2%, with retail trade leading the pack.
The industries reporting growth of business activity in November — listed in order — are: Retail Trade; Mining; Real Estate, Rental & Leasing; Utilities; Information; Management of Companies & Support Services; Accommodation & Food Services; Public Administration; and Transportation & Warehousing. The industries reporting decreased business activity in November — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Arts, Entertainment & Recreation; Other Services; Educational Services; Wholesale Trade; Professional, Scientific & Technical Services; Finance & Insurance; and Construction.
New orders increased, and generally 50% is the inflection point between expansion and contraction. New orders are an indicator of future business activity,
The employment index cliff dove -4.4 points to 48.9%. Remember anything below 50 means contraction or in the case of workers, firing people. The below graph has been normalized to 50, the ISM inflection point for expansion versus contraction. The unemployment report, showed a plus of 146,000 private service sector jobs in November with -12,000 jobs in construction, a sharp contrast to the ISM survey results claiming construction employment increased.
Below are supplier deliveries or vendor supplies and it's how fast businesses are getting their stuff to make more stuff. Above 50 is a slow down, which is opposite how many of these sub-indices are defined. Slow-downs mean more demand and also can limit the ability of that business to produce, or business activity. No stuff to make more stuff and you're stuck. This month the index decreased 2.0 percentage points to 50, with Agriculture being the #1 sector reporting faster supply deliveries to their businesses.
Prices paid by the services sector jumped 5.4 percentage points to 62.5. Arts, Entertainment & Recreation topped the reported increase list, hello Netflix.
Order backlogs are still in contraction, which isn't a good sign for demand.
ISM's Non-Manufacturing Backlog of Orders Index contracted in November for the fifth time in six months. The index registered 48 percent, 1 percentage point higher than the 47 percent reported in October.
The big story is inventories, which moved from contraction to expansion with a whopping 7 percentage point jump to 52.5%. 27% of those surveyed do not have or monitor inventories. The change in private inventories subtracted 1.55 percentage points from Q3 GDP.
Export orders, or new orders from overseas increased +1.5 percentage points to 55.5%, although use of import materials for their businesses increased +0.5 percentage points to 48.5%. Imports are still in contraction. Q3 GDP was helped by less imports and an increase in exports.
The NMI is made up of: Business Activity, New Orders, Employment and Supplier Deliveries, all equally weighted.
To read more sub-indices and details see the actual report (although no eye candy from the ISM).
Here is manufacturing ISM overview for November.
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