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July’s Non-Manufacturing ISM comes in Below Expectations

August 5th, 2009 Michael McDonough

July’s non-manufacturing ISM came in at 46.4, compared to last month’s reading of 47.0 in June, and a market consensus of 48.2.  July’s employment index moved to 41.5 from 43.4.  The prices paid index moved to 41.3 from 53.7.  Weakness in the employment index coupled with a weaker than anticipated ADP report could place negative pressure on Friday’s critical payroll release.  The market had an immediate adverse reaction to the news.  Seven of the 18 industries tracked by the index report gains in July, led by real estate, entertainment, and agriculture.

Non-Manufacturing ISM Breakdown:

Jul-09 Jun-09 May-09 Apr-09 Mar-09 Feb-09 Jan-09
NMI/PMI 46.4 47.0 44.0 43.7 40.8 41.6 42.9
Bus Activity 46.1 49.8 42.4 45.2 44.1 40.2 44.2
New Orders 48.1 48.6 44.4 47.0 38.8 40.7 41.6
Backlog Orders 42.0 46.0 40.0 44.0 41.0 36.5 37.5
New Export Orders 47.5 54.5 47.0 48.5 39.0 40.0 39.0
Inventory Sent 62.5 67.0 62.5 62.5 60.0 66.5 62.5
Imports 45.0 47.0 46.0 48.5 37.0 39.0 40.5
Prices Index 41.3 53.7 46.9 40.0 39.1 48.1 42.5
Employment 41.5 43.4 39.0 37.0 32.3 37.3 34.4
Supplier Deliveries 50.0 46.0 50.0 45.5 48.0 48.0 51.5

Additionally, July factory orders were also released at 10:00AM and they rose 0.4%, compared to a Bloomberg consensus of -0.8%.  Non-durable goods orders rose 2.7% in June.

ISM respondents had this to say regarding their sectors:

  • “Economic activity continues to decline.” (Transportation & Warehousing)
  • “Continued soft sales, offset by improving profit margins.” (Accommodation & Food Services)
  • “Stimulus funds have increased business activity.” (Public Administration)
  • “Business downturn seems to be stabilizing somewhat.” (Information)
  • “There is still downward pressure on our products; however, our sales volume is stabilizing.” (Mining)
  • “The past month’s volume target and operating volumes were met. Rising concerns over the future form of healthcare reform and impact on provider organizations.” (Health Care & Social Assistance)
  • “Although attendance is up, business levels remain steady. More people, fewer dollars spent — an indication that discretionary spending is limited.” (Arts, Entertainment & Recreation)

Non-Manufacturing ISM vs Manufacturing ISM

NonmanISMSource: St Louis Fed

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