Nine non-manufacturing industries reported increased activity in July. Members’ comments in July are mixed about business conditions. The overall indication in July is continued economic growth in the non-manufacturing sector, but at a slower pace than in June.”
The nine industries reporting growth in July — listed in order — are: Finance & Insurance; Accommodation & Food Services; Transportation & Warehousing; Information; Construction; Public Administration; Educational Services; Retail Trade; and Wholesale Trade. The six industries reporting decreased activity from June to July are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Other Services(c); Arts, Entertainment & Recreation; and Health Care & Social Assistance.
Business Activity
ISM’s Non-Manufacturing Business Activity Index in July registered 55.8 percent compared to the 60.7 percent registered in June, indicating a slower rate of growth in business activity in July. The implication is that non-manufacturing business activity is continuing to increase for the 52nd consecutive month. Nine industries reported increased business activity, and six industries reported decreased activity for the month of July.
New Orders
ISM’s Non-Manufacturing New Orders Index decreased to 52.8 percent in July from the 56.9 percent registered in June. This indicates continued expansion of new orders, but at a slower rate than in June. Comments from members include: “Fewer new job orders” and “Less patient visits.”
Employment activity in the non-manufacturing sector increased at a slower rate in July compared to June. This was the 36th consecutive monthly increase in non-manufacturing employment. ISM’s Non-Manufacturing Employment Index for July is 51.7 percent, a 3.3 percentage point decrease from the 55 percent reported in June. Ten industries reported increased employment, six reported a decrease, and two indicated employment is unchanged from June. Comments from respondents include: “Natural attrition and hiring freezes”; “Reducing temps and not replacing some positions”; and “Retirements occur at above average levels from May through June each year.”
Inventories
ISM’s Non-Manufacturing Inventories Index registered 55 percent in July, indicating that inventories are growing at a faster rate compared to June. Inventories are expanding for the sixth consecutive month after one month of contraction in January 2007. Of the total respondents in July, 29 percent indicated they do not have inventories or do not measure them. Comments from members include: “Stocking seasonal items for special events”; “We are increasing all of our inventory to be closer to our max levels as opposed to our minimum levels”; and “Past activity still drives purchase quantities.”
Prices
Prices paid by non-manufacturing organizations for purchased materials and services increased in July for the 50th consecutive month. ISM’s Non-Manufacturing Prices Index for July is 61.3 percent, 4.2 percentage points lower than June’s index of 65.5 percent. In July, the percentage of respondents reporting higher prices decreased by 6 percentage points to 29 percent as compared to June. The percentage indicating no change increased from 62 percent in June to 68 percent in July. The percentage of respondents noting lower prices remained the same at 3 percent in July.
Imports
In July, the ISM Non-Manufacturing Imports Index registered 54.5 percent, 3 percentage points lower than June’s index of 57.5 percent, indicating that use of imports increased at a slower rate in July when compared to June. In July, 63 percent of respondents reported that they do not use, or do not track, the use of imported materials.
Inventory Sentiment
The ISM Non-Manufacturing Inventory Sentiment Index in July registered 65 percent, 4.5 percentage points higher than the 60.5 percent reported in June. This indicates that non-manufacturing purchasing and supply executives feel more discomfort with current levels of inventory in July than they did during June. In July, 35 percent of respondents felt their inventories were too high, 5 percent indicated their inventories were too low, and 60 percent said that their inventories were about right.
