EconoIndicators / Nonmanufacturing Report on Business

Non-manufacturing Report At a Glance
Index Readings Above 50 Represent Growth

Business Activity/Production Index: 55.8
Change: Up 1
New Orders: 55.7
Change: Up 2.3
Employment: 51.8
Change: Down 0.9
Inventories: 49.5
Change: Down 0.5

Technorati Tags: service, non-manufacturing, economy

October 2007 Non-Manufacturing ISM Report On Business
Business Activity at 55.8%
New Orders Index at 55.7%
Employment Index at 51.8%

(Tempe, Arizona) — Business activity in the non-manufacturing sector increased at a faster rate in October than in September, 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, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee; and senior vice president — supply management for Hilton Hotels Corporation. “Non-manufacturing business activity increased for the 55th consecutive month in October,” Nieves said. He added, “The Business Activity Index increased 1 percentage point to 55.8 percent for the month of October. The New Orders Index increased at a faster rate, with the index registering 55.7 percent. The Employment Index decreased to 51.8 percent and the Prices Index decreased to 63.5 percent in October. Nine non-manufacturing industries reported increased activity in October. Members’ comments in October remain mixed and concerned about the uncertainty of business conditions. The overall indication in October is continued economic growth in the non-manufacturing sector at a faster pace than in September.”
TOP PERFORMING INDUSTRIES

The nine industries reporting growth in October — listed in order — are: Other Services*; Mining; Retail Trade; Construction; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Arts, Entertainment & Recreation; Accommodation & Food Services; and Health Care & Social Assistance. The four industries reporting decreased activity from September to October are: Management of Companies & Support Services; Information; Wholesale Trade; and Public Administration.
WHAT RESPONDENTS ARE SAYING …

* “Overall economic activity is steady. Awaiting approvals on client planned capital spending for 2008.” (Professional, Scientific & Technical Services)
* “Sales are still well below budget, but a strong September finish helped narrow the gap.” (Wholesale Trade)
* “Bracing for the next wave of price increases as a result of record oil prices.” (Educational Services)
* “Business is holding steady and meeting forecast.” (Real Estate, Rental & Leasing)
* “Business is very sluggish.” (Retail Trade)
* “Credit markets continue to severely impact financial services business, especially the mortgage banking sector.” (Finance & Insurance)

ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS* OCTOBER 2007
	Non-Manufacturing						Manufacturing
Index	Series Index Oct.	Series Index Sept.	Percent Point Change	Direction	Rate of Change	Trend** (Months)	Series Index Oct.	Series Index Sept.	Percent Point Change
Business Activity/Production	55.8	54.8	+1.0	Growing	Faster	55	49.6	54.6	-5.0
New Orders	55.7	53.4	+2.3	Growing	Faster	55	52.5	53.4	-0.9
Employment	51.8	52.7	-0.9	Growing	Slower	2	52.0	51.7	+0.3
Supplier Deliveries	50.0	50.5	-0.5	Unchanged	From Slowing	1	50.6	51.9	-1.3
Inventories	49.5	50.0	-0.5	Contracting	From Unchanged	1	47.2	41.6	+5.6
Prices	63.5	66.1	-2.6	Increasing	Slower	53	63.0	59.0	+4.0
Backlog of Orders	43.5	47.0	-3.5	Contracting	Faster	2	46.0	51.0	-5.0
New Export Orders	56.0	50.0	+6.0	Growing	From Unchanged	1	57.0	54.5	+2.5
Imports	55.5	51.0	+4.5	Growing	Faster	7	47.5	53.0	-5.5
Inventory Sentiment	60.0	62.0	-2.0	"Too High"	Slower	125	N/A	N/A	N/A
Customers’ Inventories	N/A	N/A	N/A				54.0	50.0	+4.0

* Non-Manufacturing ISM Report On Business® data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. Manufacturing ISM Report On Business® data is seasonally adjusted for New Orders, Production, Employment, Supplier Deliveries and Inventories.

** Number of months moving in current direction.

COMMODITIES REPORTED UP / DOWN IN PRICE, and IN SHORT SUPPLY

Commodities Up in Price

Airfare (4); Batteries; Cheese; Copper; Copper Products; Corrugated/Boxes (2); Diesel Fuel; #2 Diesel Fuel; Fuel (9); Gasoline (2)*; Food; Food & Beverage; #2 Heating Fuel; Oil; Petrochemical; Petroleum; Poly Bags; and Travel.

Commodities Down in Price

Gasoline* (5) is the only commodity reported as down in price.

Commodities in Short Supply

Assorted Qualified Labor and Construction Labor.

*Reported both Up and Down in price.

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

OCTOBER 2007 NON-MANUFACTURING INDEX SUMMARIES

Business Activity

ISM’s Non-Manufacturing Business Activity Index in October registered 55.8 percent, indicating a faster rate of growth in business activity compared to September. The implication is that non-manufacturing business activity is continuing to increase for the 55th consecutive month. Nine industries reported increased business activity, and four industries reported decreased activity for the month of October.

The industries reporting growth of business activity in October are: Other Services*; Mining; Retail Trade; Construction; Real Estate, Rental & Leasing; Professional, Scientific & Technical Services; Arts, Entertainment & Recreation; Accommodation & Food Services; and Health Care & Social Assistance. The four industries reporting decreased activity from September to October are: Management of Companies & Support Services; Information; Wholesale Trade; and Public Administration.

Business Activity	% Higher	% Same	% Lower	Index
October 2007	29	51	20	55.8
September 2007	25	56	19	54.8
August 2007	27	54	19	55.8
July 2007	30	52	18	55.8

THE LAST 12 MONTHS

THE LAST 12 MONTHS
Month	Business Activity Index	Month	Business Activity Index
Oct 2007	55.8	Apr 2007	56.0
Sept 2007	54.8	Mar 2007	52.4
Aug 2007	55.8	Feb 2007	54.3
Jul 2007	55.8	Jan 2007	59.0
Jun 2007	60.7	Dec 2006	56.7
May 2007	59.7	Nov 2006	58.3
Average for 12 months — 56.6 High — 60.7 Low — 52.4

New Orders

ISM’s Non-Manufacturing New Orders Index increased to 55.7 percent in October from the 53.4 percent registered in September. This indicates continued expansion of new orders at a faster rate than in September. Comments from members include: "Increase in marketing/business development activities" and "Prepping for peak holiday period."

Industries reporting growth of new orders in October are: Other Services*; Agriculture, Forestry, Fishing & Hunting; Mining; Retail Trade; Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Information; and Health Care & Social Assistance. The industries reporting contraction of new orders in October are: Utilities; Wholesale Trade; Management of Companies & Support Services; Educational Services; and Finance & Insurance.

New Orders	% Higher	% Same	% Lower	Index
October 2007	27	54	19	55.7
September 2007	22	59	19	53.4
August 2007	27	57	16	57.0
July 2007	25	57	18	52.8

Employment

Employment activity in the non-manufacturing sector increased in October, but at a slower rate when compared to September. ISM’s Non-Manufacturing Employment Index for October is 51.8 percent, a 0.9 percentage point decrease from the 52.7 percent reported in September. Six industries reported increased employment, seven reported a decrease, and five indicated employment is unchanged from September. Comments from respondents include: "Planned staff reductions" and "Reducing head count due to lagging sales."

The industries reporting growth in employment in October are: Transportation & Warehousing; Health Care & Social Assistance; Real Estate, Rental & Leasing; Retail Trade; Finance & Insurance; and Information. The seven industries reporting a reduction in employment in October are: Utilities; Agriculture, Forestry, Fishing & Hunting; Other Services*; Management of Companies & Support Services; Wholesale Trade; Professional, Scientific & Technical Services; and Public Administration.

Employment	% Higher	% Same	% Lower	Index
October 2007	17	66	17	51.8
September 2007	18	66	16	52.7
August 2007	12	70	18	47.9
July 2007	21	66	13	51.7

Supplier Deliveries

In October, the rate of supplier deliveries remained unchanged from September. The index registered 50 percent. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in October are: Utilities; Professional, Scientific & Technical Services; Information; and Finance & Insurance. The industries reporting faster supplier deliveries in October are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Wholesale Trade; Retail Trade; and Public Administration.

Supplier Deliveries	% Slower	% Same	% Faster	Index
October 2007	9	82	9	50.0
September 2007	7	87	6	50.5
August 2007	7	87	6	50.5
July 2007	8	87	5	51.5

Inventories

ISM’s Non-Manufacturing Inventories Index registered 49.5 percent in October, indicating that inventory levels contracted during the month. Of the total respondents in October, 30 percent indicated they do not have inventories or do not measure them. Comments from members include: "Year end inventory" and "Increase in demand."

The industries reporting increases in inventories in October are: Agriculture, Forestry, Fishing & Hunting; Real Estate, Rental & Leasing; Retail Trade; and Health Care & Social Assistance. The industries reporting decreases in inventories in October are: Public Administration; Management of Companies & Support Services; Construction; Wholesale Trade; Finance & Insurance; and Information.

Inventories	% Higher	% Same	% Lower	Index
October 2007	18	63	19	49.5
September 2007	18	64	18	50.0
August 2007	26	62	12	57.0
July 2007	28	54	18	55.0

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in October for the 53rd consecutive month. ISM’s Non-Manufacturing Prices Index for October is 63.5 percent, 2.6 percentage points lower than September’s index of 66.1 percent. In October, the percentage of respondents reporting higher prices remained at 30 percent, the same as reported in September. The percentage indicating no change decreased 1 percentage point to 67 percent. The percentage of respondents noting lower prices increased by 1 percentage point in October to 3 percent.

The industries reporting an increase in prices paid in October are: Agriculture, Forestry, Fishing & Hunting; Mining; Educational Services; Accommodation & Food Services; Retail Trade; Information; Management of Companies & Support Services; Professional, Scientific & Technical Services; Construction; Wholesale Trade; Utilities; Real Estate, Rental & Leasing; Finance & Insurance; Health Care & Social Assistance; and Public Administration. The two industries reporting a decrease in prices in October are: Other Services* and Transportation & Warehousing.

Prices	% Higher	% Same	% Lower	Index
October 2007	30	67	3	63.5
September 2007	30	68	2	66.1
August 2007	23	68	9	58.6
July 2007	29	68	3	61.3

Backlog of Orders

ISM’s Non-Manufacturing Backlog of Orders Index contracted in October for the second consecutive month, registering 43.5 percent, 3.5 percentage points lower than the 47 percent reported in September. Of the total respondents in October, 43 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in October are: Other Services* and Real Estate, Rental & Leasing. The industries reporting lower backlog of orders in October are: Arts, Entertainment & Recreation; Management of Companies & Support Services; Information; Public Administration; Wholesale Trade; Utilities; Professional, Scientific & Technical Services; and Retail Trade.

Backlog of Orders	% Higher	% Same	% Lower	Index
October 2007	4	79	17	43.5
September 2007	13	68	19	47.0
August 2007	13	74	13	50.0
July 2007	14	78	8	53.0

New Export Orders

Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically based personnel increased for the month of October. The New Export Orders Index for October is 56 percent, compared to September’s index of 50 percent. Of the total respondents in October, 72 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.

The industries reporting an increase in new export orders in October are: Mining; Accommodation & Food Services; Other Services*; Professional, Scientific & Technical Services; Retail Trade; and Finance & Insurance. The three industries reporting a decrease in export orders are: Public Administration; Information; and Agriculture, Forestry, Fishing & Hunting.

New Export Orders	% Higher	% Same	% Lower	Index
October 2007	26	60	14	56.0
September 2007	17	66	17	50.0
August 2007	19	69	12	53.5
July 2007	22	61	17	52.5

Imports

In October, the ISM Non-Manufacturing Imports Index registered 55.5 percent, 4.5 percentage points higher than September’s index of 51 percent, indicating that use of imports increased at a faster rate in October when compared to September. In October, 63 percent of respondents reported that they do not use, or do not track, the use of imported materials.

The industries reporting an increase in the use of imports in October are: Information; Transportation & Warehousing; Arts, Entertainment & Recreation; Finance & Insurance; Accommodation & Food Services; Retail Trade; and Wholesale Trade. The industries reporting a decrease in imports for the month of October are: Public Administration; Agriculture, Forestry, Fishing & Hunting; Management of Companies & Support Services; and Health Care & Social Assistance.

Imports	% Higher	% Same	% Lower	Index
October 2007	23	65	12	55.5
September 2007	12	78	10	51.0
August 2007	16	78	6	55.0
July 2007	19	71	10	54.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in October registered 60 percent, 2 percentage points lower than the 62 percent reported in September. This indicates that fewer non-manufacturing purchasing and supply executives feel discomfort with current levels of inventory in October than in September. In October, 26 percent of respondents felt their inventories were too high, 6 percent indicated their inventories were too low, and 68 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in October are: Agriculture, Forestry, Fishing & Hunting; Mining; Other Services*; Construction; Information; Wholesale Trade; Professional, Scientific & Technical Services; Retail Trade; and Public Administration. The two industries reporting that their inventories are too low are: Management of Companies & Support Services and Arts, Entertainment & Recreation.