Econoday Economic Report: ISM Non-Mfg Index June 3, 2011

2011 Economic Calendar

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ISM Non-Mfg Index

Released On 6/3/2011 10:00:00 AM For May, 2011

	Prior	Consensus	Consensus Range	Actual
Composite Index - Level	52.8	54.0	52.0 to 55.0	54.6

Highlights
In what is a rare bit of good news, the ISM reports broad month-to-month acceleration in the non-manufacturing economy. The report's composite headline index rose nearly two points to 54.6 with strength centered where it should be, that is in new orders which rose more than four points to 56.8. Employment, in contrast to this morning's jobs report, accelerated nicely, up more than two points to a 54.0 level that for this report is very strong. In other readings, deliveries lengthened, which is a sign of strength, and backlog orders rose at a healthy pace. This report, which is based on a broad sampling of the nation's purchasers, should help limit the damage being done this morning in the financial markets.

Market Consensus before announcement
The composite index from the ISM non-manufacturing survey dropped notably in April, coming in at 52.8 versus 57.3 the prior month. By components, new orders were down sharply while business activity and employment also tugged down on the headline reading. Supplier deliveries actually had a modest lift while the contribution from inventories was unchanged. The most notable deceleration was for the new orders index which slowed to 52.7 from 64.1 in April. Despite the lower number, new orders remained in positive territory (above breakeven of 50) as did the overall composite and the remaining components-meaning economic activity is still on an uptrend but a softer one.

Definition
The non-manufacturing ISM surveys more than 375 firms from numerous sectors across the United States, including agriculture, mining, construction, transportation, communications, wholesale trade and retail trade. The non-manufacturing composite index has four equally weighted components: business activity (closely related to a production index), new orders, employment, and supplier deliveries (also known as vendor performance). The first three components are seasonally adjusted but the supplier deliveries index does not have statistically significant seasonality and is not adjusted. For the composite index, a reading above 50 percent indicates that the non-manufacturing economy is generally expanding; below 50 percent indicates that it is generally declining. The supplier deliveries component index requires extra explanation. A reading above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries. However, slower deliveries are a plus for the economy—indicating demand is up and vendors are not able to fill orders as quickly. Why Investors Care

The ISM non-manufacturing survey does not compile a composite index like its manufacturing cousin. The business activity index, which is actually akin to the production index in the manufacturing survey, is widely followed as the key figure from this survey.
Data Source: Haver Analytics

2011 Release Schedule

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