May 2019 Non-Manufacturing ISM® Report On Business®

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NMI® at 56.9%

Business Activity Index at 61.2%

New Orders Index at 58.6%

Employment Index at 58.1%

(Tempe, Arizona) – Economic activity in the non-manufacturing sector grew in May for the 112th 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 56.9 percent, which is 1.4 percentage points higher than the April reading of 55.5 percent. This represents continued growth in the non-manufacturing sector, at a slightly faster rate. The Non-Manufacturing Business Activity Index increased to 61.2 percent, 1.7 percentage points higher than the April reading of 59.5 percent, reflecting growth for the 118th consecutive month, at a faster rate in May. The New Orders Index registered 58.6 percent; 0.5 percentage point higher than the reading of 58.1 percent in April. The Employment Index increased 4.4 percentage points in May to 58.1 percent from the April reading of 53.7 percent. The Prices Index decreased 0.3 percentage point from the April reading of 55.7 percent to 55.4 percent, indicating that prices increased in May for the 24th consecutive month. According to the NMI®, 16 non-manufacturing industries reported growth. The non-manufacturing sector continues to experience a slight uptick in business activity, but it is still leveling off overall. Respondents are mostly optimistic about overall business conditions, but concerns remain about tariffs and employment resources.”

INDUSTRY PERFORMANCE

The 16 non-manufacturing industries reporting growth in May — listed in order — are: Accommodation & Food Services; Educational Services; Management of Companies & Support Services; Construction; Transportation & Warehousing; Real Estate, Rental & Leasing; Utilities; Wholesale Trade; Public Administration; Professional, Scientific & Technical Services; Mining; Health Care & Social Assistance; Other Services; Finance & Insurance; Information; and Retail Trade. The only industry reporting a decrease is Agriculture, Forestry, Fishing & Hunting.

What respondents are saying
  • “Waiting to see [the] impact of Chinese import tariff affect.” (Utilities)
  • “Our local economy is doing very well except for a large number of suburban office vacancies.” (Finance & Insurance)
  • “There is added pressure to find operational savings so we can reduce the cost of healthcare, be a model to others, and pass the savings along to our patients and members of our health insurance business.” (Health Care & Social Assistance)
  • “Economy is good and it’s showing in our weekly sales, tariffs are affecting some, but doesn’t seem to matter. Our prices are up as well as costs, but sales are good.” (Accommodation & Food Services)
  • “Low unemployment is good since our business is entertainment and relies on discretionary spend.” (Arts, Entertainment & Recreation
  • “Ability to source and retain employees continues to strain the business.” (Construction)
  • “General conditions are steady, not increasing or going down.” (Information)
  • “We reported very strong Q1 results and raised our FY guidance. However, our stock has traded down due to the continued uncertainty in healthcare/Rx. There is a concern that tariffs on pharmaceuticals could be on the horizon.” (Retail Trade)
  • “Our business level is connected to metal commodity future outlook, but current trade war does not let investors have a clear sight. In this sense, [it] has been very difficult to plan in a long term ahead.” (Mining)
  • “Gearing up for summer busy construction season.” (Public Administration)

ISM® NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM® NON-MANUFACTURING AND ISM® MANUFACTURING SURVEYS*
MAY 2019

Non-Manufacturing Manufacturing
Index Series Index May Series Index Apr Percent Point Change Direction Rate of Change Trend** (Months) Series Index May Series Index Apr Percent Point Change
NMI®/ PMI® 56.9 55.5 +1.4 Growing Faster 112 52.1 52.8 -0.7
Business Activity/ Production 61.2 59.5 +1.7 Growing Faster 118 51.3 52.3 -1.0
New Orders 58.6 58.1 +0.5 Growing Faster 118 52.7 51.7 +1.0
Employment 58.1 53.7 +4.4 Growing Faster 63 53.7 52.4 +1.3
Supplier Deliveries 49.5 50.5 -1.0 Faster From Slowing 1 52.0 54.6 -2.6
Inventories 54.0 51.5 +2.5 Growing Faster 2 50.9 52.9 -2.0
Prices 55.4 55.7 -0.3 Increasing Slower 24 53.2 50.0 +3.2
Backlog of Orders 52.5 55.0 -2.5 Growing Slower 17 47.2 53.9 -6.7
New Export Orders 55.5 57.0 -1.5 Growing Slower 28 51.0 49.5 +1.5
Imports 50.0 55.0 -5.0 Unchanged From Growing 1 49.4 49.8 -0.4
Inventory Sentiment 58.5 60.0 -1.5 Too High Slower 263 N/A N/A N/A
Customers’ Inventories N/A N/A N/A N/A N/A N/A 43.7 42.6 +1.1
Overall Economy Growing Faster 118
Non-Manufacturing Sector Growing Faster 112
Non-Manufacturing ISM® Report On Business® data is seasonally adjusted for the 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

Dairy; Diesel Fuel (3); Freight; Fuel (2); Gasoline (3); Labor (8); Labor — Construction (3); and Labor — Temporary (3).

Commodities Down in Price

Oriented Strand Board (OSB); and Steel Products (2).

Commodities in Short Supply

Construction Subcontractors (17); Labor (8); Labor — Construction (38); Labor — Temporary (9); Trays; and Tubing (2).

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


May 2019 Non-Manufacturing Index Summaries


NMI®

In May, the NMI® registered 56.9 percent, 1.4 percentage points higher than the 55.5 percent in April. The non-manufacturing sector grew for the 112th 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 May NMI® indicates growth for the 118th consecutive month in the overall economy and expansion in the non-manufacturing sector for the 112th consecutive month. Nieves says, “The past relationship between the NMI® and the overall economy indicates that the NMI® for May (56.9 percent) corresponds to a 2.9-percent increase in real gross domestic product (GDP) on an annualized basis.”

NMI® History

Month NMI®
May 2019 56.9
Apr 2019 55.5
Mar 2019 56.1
Feb 2019 59.7
Jan 2019 56.7
Dec 2018 58.0
Month NMI®
Nov 2018 60.4
Oct 2018 60.0
Sep 2018 60.8
Aug 2018 58.8
Jul 2018 56.7
Jun 2018 58.7
58.2
60.8
55.5

Business Activity

ISM®’s Business Activity Index registered 61.2 percent in May, an increase of 1.7 percentage points from the April reading of 59.5 percent. This represents growth in business activity for the 118th consecutive month. Twelve industries reported increased business activity. Comments from respondents include: “We are winning new contracts” and “Finally operating at full capacity following partial government shutdown.”

The 12 industries reporting growth of business activity in May — listed in order — are: Accommodation & Food Services; Management of Companies & Support Services; Construction; Educational Services; Wholesale Trade; Utilities; Public Administration; Transportation & Warehousing; Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Finance & Insurance; and Health Care & Social Assistance. The two industries reporting a contraction in business activity are: Agriculture, Forestry, Fishing & Hunting; and Information.

Business Activity % Higher % Same % Lower Index
May 2019 33 59 8 61.2
Apr 2019 36 56 8 59.5
Mar 2019 33 52 15 57.4
Feb 2019 39 51 10 64.7

New Orders

ISM®’s Non-Manufacturing New Orders Index registered 58.6 percent, an increase of 0.5 percentage point from the April reading of 58.1 percent. New orders grew in May for the 118th consecutive month, at a faster rate compared with April. Comments from respondents include: “Increase in surgical cases” and “Companies seem to be looking for skills enhancement for their employees. More training sessions are being scheduled.”

The 11 industries reporting growth of new orders in May — listed in order — are: Educational Services; Accommodation & Food Services; Management of Companies & Support Services; Transportation & Warehousing; Utilities; Mining; Wholesale Trade; Public Administration; Construction; Professional, Scientific & Technical Services; and Real Estate, Rental & Leasing. The three industries reporting contraction in May are: Agriculture, Forestry, Fishing & Hunting; Other Services; and Information.

New Orders % Higher % Same % Lower Index
May 2019 30 59 11 58.6
Apr 2019 36 54 10 58.1
Mar 2019 33 53 14 59.0
Feb 2019 38 52 10 65.2

Employment

Employment activity in the non-manufacturing sector grew in May for the 63rd consecutive month. ISM®’s Non-Manufacturing Employment Index registered 58.1 percent, an increase of 4.4 percentage points from the April reading of 53.7 percent. Twelve industries reported increased employment, and three industries reported decreased employment. Comments from respondents include: “Filling open positions” and “We added a few more employees to fill outstanding needs.”

The 12 industries reporting an increase in employment in May — listed in order — are: Real Estate, Rental & Leasing; Transportation & Warehousing; Construction; Accommodation & Food Services; Management of Companies & Support Services; Professional, Scientific & Technical Services; Other Services; Educational Services; Health Care & Social Assistance; Public Administration; Wholesale Trade; and Retail Trade. The three industries reporting a reduction in employment in May are: Mining; Agriculture, Forestry, Fishing & Hunting; and Information.

Employment % Higher % Same % Lower Index
May 2019 28 62 10 58.1
Apr 2019 23 62 15 53.7
Mar 2019 25 62 13 55.9
Feb 2019 21 66 13 55.2

Supplier Deliveries

Supplier deliveries contracted in May for the for the first time since December 2015, when the index registered 48.5 percent. The index registered 49.5 percent, which is 1 percentage point lower than the 50.5 percent registered in April. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries. Comments from respondents include: “Lower order volume” and “Extended delivery dates.”

The four industries reporting slower deliveries in May are: Mining; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Information. The four industries reporting faster deliveries are: Agriculture, Forestry, Fishing & Hunting; Wholesale Trade; Management of Companies & Support Services; and Finance & Insurance. Ten industries reported no change in supplier deliveries in May as compared to April.

Supplier Deliveries % Slower % Same % Faster Index
May 2019 4 91 5 49.5
Apr 2019 7 87 6 50.5
Mar 2019 9 86 5 52.0
Feb 2019 11 85 4 53.5

Inventories*

ISM®’s Non-Manufacturing Inventories Index grew in May, registering 54.0 percent, which is 2.5 percentage points higher than the 51.5 percent that was reported in April. Of the total respondents in May, 31 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “Reordering low stock” and “To reflect increase in orders.”

The 11 industries reporting an increase in inventories in May — listed in order — are: Finance & Insurance; Accommodation & Food Services; Public Administration; Agriculture, Forestry, Fishing & Hunting; Utilities; Transportation & Warehousing; Retail Trade; Construction; Wholesale Trade; Professional, Scientific & Technical Services; and Health Care & Social Assistance. The three industries reporting a decrease in inventories are: Real Estate, Rental & Leasing; Mining; and Information.

Inventories % Higher % Same % Lower Index
May 2019 21 66 13 54.0
Apr 2019 21 61 18 51.5
Mar 2019 19 62 19 50.0
Feb 2019 20 62 18 51.0

Prices*

Prices paid by non-manufacturing organizations for materials and services increased in May, for the 24th consecutive month. ISM®’s Non-Manufacturing Prices Index registered 55.4 percent; 0.3 percentage point lower than the 55.7 percent reported in April.

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

Prices % Higher % Same % Lower Index
May 2019 21 76 3 55.4
Apr 2019 20 76 4 55.7
Mar 2019 21 77 2 58.7
Feb 2019 18 74 8 54.4
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 May. The index registered 52.5 percent, which is 2.5 percentage points lower than the 55.0 percent reported in April. Of the total respondents in May, 39 percent indicated they do not measure backlog of orders.

The seven industries reporting an increase in order backlogs in May — listed in order — are: Utilities; Construction; Transportation & Warehousing; Mining; Health Care & Social Assistance; Finance & Insurance; and Professional, Scientific & Technical Services. The four industries that reported a decrease in backlogs in May are: Real Estate, Rental & Leasing; Management of Companies & Support Services; Information and Public Administration.

Backlog of Orders % Higher % Same % Lower Index
May 2019 14 77 9 52.5
Apr 2019 20 70 10 55.0
Mar 2019 22 69 9 56.5
Feb 2019 24 63 13 55.5

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 28th consecutive month. The New Export Orders Index registered 55.5 percent in May, which is 1.5 percentage points lower than the 57 percent that was reported in April. Of the total respondents in May, 62 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 May are: Real Estate, Rental & Leasing; Wholesale Trade; Accommodation & Food Services; Information; and Professional, Scientific & Technical Services. The only industry to report a decrease in exports for the month of May is Other Services. Nine industries reported no change in May compared to April.

New Export Orders % Higher % Same % Lower Index
May 2019 13 85 2 55.5
Apr 2019 20 74 6 57.0
Mar 2019 18 69 13 52.5
Feb 2019 17 76 7 55.0

Imports

The Imports Index remained unchanged in May. The reading of 50 percent is 5 percentage points lower than the 55 percent reported in April. Fifty-five 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 May are: Mining; Accommodation & Food Services; and Wholesale Trade. The five industries reporting a decrease in imports in the month of May are: Agriculture, Forestry, Fishing & Hunting; Retail Trade; Information; Construction; and Professional, Scientific & Technical Services. Nine industries reported no change in imports in May as compared to April.

Imports % Higher % Same % Lower Index
May 2019 8 84 8 50.0
Apr 2019 16 78 6 55.0
Mar 2019 13 77 10 51.5
Feb 2019 8 81 11 48.5
*The Inventories, Customers’ Inventories, Prices, Backlog of Orders, New Export Orders and Imports Indexes do not meet the accepted criteria for seasonal adjustments.

Inventory Sentiment

The ISM® Non-Manufacturing Inventory Sentiment Index in May registered 58.5 percent, which is 1.5 percentage points lower than the 60 percent that was reported in April. This indicates that respondents believe their inventories are still too high.

The 11 industries reporting sentiment that their inventories were too high in May — listed in order — are: Wholesale Trade; Other Services; Information; Accommodation & Food Services; Finance & Insurance; Utilities; Management of Companies & Support Services; Retail Trade; Health Care & Social Assistance; Public Administration; and Construction. The two industries reporting a feeling that their inventories were too low in May are: Transportation & Warehousing; and Real Estate, Rental & Leasing.

Inventory Sentiment % Too High % About Right % Too Low Index
May 2019 21 75 4 58.5
Apr 2019 24 72 4 60.0
Mar 2019 27 71 2 62.5
Feb 2019 24 70 6 59.0