The ISM Non-manufacturing report for July 2011 shows the overall index decreased to 52.7%, -0.6 points lower than June's 53.3% and the same level as February 2010. This report is also referred to as the services index, or service sector index. The services sector is slowing down.
New orders decreased -1.9 percentage points to 51.7% with Business activity gaining +2.7 to 56.1%. This is a slowing of the services sector for new orders are future production. Both imports and exports are contracting. Professional, Scientific & Technical Services tops the ISM list in many of the sub-indices for contraction. Here we are again, a sluggish mire of recession like treading water. Below is the table from the ISM services report, edited.
| ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE JULY 2011 | ||||||
|---|---|---|---|---|---|---|
| Index | Series Index July |
Series Index June |
Percent Point Change |
Direction | Rate of Change |
Trend (Months) |
| NMI/PMI | 52.7 | 53.3 | -0.6 | Growing | Slower | 20 |
| Business Activity/Production | 56.1 | 53.4 | +2.7 | Growing | Faster | 24 |
| New Orders | 51.7 | 53.6 | -1.9 | Growing | Slower | 24 |
| Employment | 52.5 | 54.1 | -1.6 | Growing | Slower | 11 |
| Supplier Deliveries | 50.5 | 52.0 | -1.5 | Slowing | Slower | 16 |
| Inventories | 56.5 | 53.5 | +3.0 | Growing | Faster | 6 |
| Prices | 56.6 | 60.9 | -4.3 | Increasing | Slower | 24 |
| Backlog of Orders | 44.0 | 48.5 | -4.5 | Contracting | Faster | 2 |
| New Export Orders | 49.0 | 57.0 | -8.0 | Contracting | From Growing | 1 |
| Imports | 47.5 | 46.5 | +1.0 | Contracting | Slower | 2 |
| Inventory Sentiment | 59.5 | 58.5 | +1.0 | Too High | Faster | 170 |
Below is the graph for the non-manufacturing ISM business activity index, which is the bright spot in this report. The ISM list of increased business activity sectors is Transportation & Warehousing; Real Estate, Rental & Leasing; Arts, Entertainment & Recreation; Accommodation & Food Services; Mining; Retail Trade; Educational Services; Information; Finance & Insurance; Public Administration; Health Care & Social Assistance; and Wholesale Trade. Is the jump in business activity possibly residential real estate coming up for air after being in the bottom depths of housing doldrums?
New orders dropped, and generally 50% is the inflection point between expansion and contraction. Weak demand is one of the comments cited.
The employment index dropped -1.6 points in July to 52.5%. 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. If above 50 is growth, well...
The industries reporting an increase in employment in July — listed in order — are: Real Estate, Rental & Leasing; Mining; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Wholesale Trade; Retail Trade; Finance & Insurance; Public Administration; and Accommodation & Food Services. The only industry reporting a reduction in employment in July is Professional, Scientific & Technical Services.
Prices paid by the services sector plunged another -4.3 percentage points to 56.6. This should help with inflation and profit margins.
45% of survey respondents do not measure order backlogs. Yet these are now in contraction, with a -4.5 plunge to 44% and the 4th month of decline. This also implies companies are catching up and demand is weakening.
31% of those surveyed do not have or monitor inventories. Yet inventory sentiment, increased another 1.0 percentage points to an overall reported too high. Changes in inventories does affect U.S. GDP. Below is the graph for inventory sentiment, an indicator if companies will reduce inventories in the future.
One of the more telling signs is the ISM list of sectors in contraction: Professional, Scientific & Technical Services; Management of Companies & Support Services; Health Care & Social Assistance; Utilities; and Construction. Professional, Scientific & Technical have been the rave, the sector various pundits point to in order to claim a structural problem with employment in order to perpetuate denial and offshoring agendas.
To read more sub-indices and details see the actual report (although no eye candy from the ISM).
Here is May's overview on the services index.
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