EconoIndicators / Non-manufacturing Report on Business

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

NMI/PMI: 49.3
Change: Up 4.7
Business Activity/Production Index: 50.8
Change: Up 8.9
New Orders: 49.6
Change: Up 6.1
Employment: 46.9
Change: Up 3
Inventories: 50
Change: Up 5.5

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February 2008 Non-Manufacturing ISM Report On Business®
NMI (Non-Manufacturing Index) at 49.3%
Business Activity Index at 50.8%
New Orders Index at 49.6%
Employment Index at 46.9%

(Tempe, Arizona) — Economic activity in the non-manufacturing sector contracted in February, 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. “The NMI (Non-Manufacturing Index) increased 4.7 percentage points to 49.3 percent, indicating contraction for the second consecutive month within the non-manufacturing sector for February 2008. Non-manufacturing business activity increased after one month of contraction. The New Orders Index and the Employment Index both contracted for the second consecutive month. The New Orders Index increased 6.1 percentage points to 49.6 percent. The Employment Index increased 3 percentage points to 46.9 percent. The Prices Index decreased to 67.9 percent in February, indicating a slight slowing in price increases for February. According to the NMI, eight non-manufacturing industries reported growth in February. Members’ comments in February are mixed and remain cautious about business conditions.”
TOP PERFORMING INDUSTRIES (Based on the NMI)

The eight industries reporting growth in February based on the new NMI composite index — listed in order — are: Real Estate, Rental & Leasing; Other Services*; Agriculture, Forestry, Fishing & Hunting; Health Care & Social Assistance; Mining; Professional, Scientific & Technical Services; Utilities; and Construction. The nine industries reporting contraction in February are: Accommodation & Food Services; Transportation & Warehousing; Educational Services; Public Administration; Management of Companies & Support Services; Finance & Insurance; Retail Trade; Information; and Wholesale Trade.
WHAT RESPONDENTS ARE SAYING …

* “Business remains strong in 2008 despite signs of an economic downturn.” (Professional, Scientific & Technical Services)
* “January was a very slow month and February has started off at the same pace.” (Wholesale Trade)
* “Business drops significantly as we move away from the holiday season.” (Retail Trade)
* “Weakness continues in both volume and pricing.” (Agriculture, Forestry, Fishing & Hunting)
* “Financial services companies are beginning to stabilize from the effects of the sub prime market issues, but overall will continue to focus on business as usual by increasing productivity of current workforce and supply base and limit any increases at this time.” (Finance & Insurance)

ISM NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM NON-MANUFACTURING AND ISM MANUFACTURING SURVEYS* FEBRUARY 2008
	Non-Manufacturing						Manufacturing
Index	Series Index Feb.	Series Index Jan.	Percent Point Change	Direction	Rate of Change	Trend** (Months)	Series Index Feb.	Series Index Jan.	Percent Point Change
NMI/PMI	49.3	44.6	+4.7	Contracting	Slower	2	48.3	50.7	-2.4
Business Activity/Production	50.8	41.9	+8.9	Growing	From Contracting	1	50.7	55.2	-4.5
New Orders	49.6	43.5	+6.1	Contracting	Slower	2	49.1	49.5	-0.4
Employment	46.9	43.9	+3.0	Contracting	Slower	2	46.0	47.1	-1.1
Supplier Deliveries	50.0	49.0	+1.0	Unchanged	From Slowing	1	50.1	52.8	-2.7
Inventories	50.0	44.5	+5.5	Unchanged	From Contracting	1	45.4	49.1	-3.7
Prices	67.9	70.7	-2.8	Increasing	Slower	57	75.5	76.0	-0.5
Backlog of Orders	49.5	46.0	+3.5	Contracting	Slower	6	45.0	44.0	+1.0
New Export Orders	46.5	52.0	-5.5	Contracting	From Growing	1	56.0	58.5	-2.5
Imports	49.0	41.5	+7.5	Contracting	Slower	2	47.5	52.5	-5.0
Inventory Sentiment	60.5	57.0	+3.5	"Too High"	Faster	129	N/A	N/A	N/A
Customers’ Inventories	N/A	N/A	N/A	N/A	N/A	N/A	49.0	49.5	-0.5

* 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

Bearings; Cleaning/Janitorial Products; Computer Supplies; Copier Paper; Corrugated; Cotton Products (2); Diesel Fuel (5); #2 Diesel Fuel (5); Food & Beverage; Fuel (13); Fuel Surcharges (2); Gasoline*(6); Medical Supplies; Office Furniture; Office Supplies; Paper (4); Plastic Products; Polyester and Polyester Products; Stainless Steel Products*; Steel Plate; Steel Products (2); and Sulfuric Acid.

Commodities Down in Price

Computer Accessories/Peripherals; Gasoline*; and Stainless Steel Products*.

Commodities in Short Supply

Coated Groundwood and Coated Paper.

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

*Indicates that commodities were reported both up and down in price.

FEBRUARY 2008 NON-MANUFACTURING INDEX SUMMARIES

NMI (Non-Manufacturing Index)

Beginning with the January 2008 Non-Manufacturing Report On Business®, a composite index is calculated as an indicator of the overall economic condition for the non-manufacturing sector. The NMI is a composite index based on the diffusion indexes for four of the indicators with equal weights: Business Activity (seasonally adjusted), New Orders (seasonally adjusted), Employment (seasonally adjusted) and Supplier Deliveries. February’s NMI at 49.3 percent indicates a contraction in the non-manufacturing sector. 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.

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

Business Activity

ISM’s Non-Manufacturing Business Activity Index in February registered 50.8 percent, indicating an increase of 8.9 percentage points after a month of contraction in January when the index registered 41.9 percent. Seven industries reported increased business activity, and eight industries reported decreased activity for the month of February. Three industries reported no change from January. Comments from respondents include: "Improving sales volume"; "Increased sales and proposal activity"; and "Increased demand for retail items we produce."

The industries reporting growth of business activity in February are: Real Estate, Rental & Leasing; Other Services*; Health Care & Social Assistance; Utilities; Professional, Scientific & Technical Services; Wholesale Trade; and Construction. The industries reporting decreased business activity in February are: Accommodation & Food Services; Mining; Transportation & Warehousing; Management of Companies & Support Services; Retail Trade; Educational Services; Finance & Insurance; and Information.

Business Activity	% Higher	% Same	% Lower	Index
February 2008	26	47	27	50.8
January 2008	18	40	42	41.9
December 2007	24	54	22	54.4
November 2007	29	51	20	54.6

THE LAST 12 MONTHS
Month	Business Activity Index	Month	Business Activity Index
Feb 2008	50.8	Aug 2007	56.3
Jan 2008	41.9	Jul 2007	55.9
Dec 2007	54.4	Jun 2007	59.7
Nov 2007	54.6	May 2007	58.4
Oct 2007	55.5	Apr 2007	56.0
Sep 2007	55.7	Mar 2007	53.0
Average for 12 months — 54.4 High — 59.7 Low — 41.9

New Orders

ISM’s Non-Manufacturing New Orders Index contracted for the second consecutive month in February. The index increased 6.1 percentage points to 49.6 percent from the seasonally adjusted 43.5 percent registered in January. Comments from respondents include: "Lagging sales"; "Typically slow period, but slower than normal"; and "Increased traffic."

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

New Orders	% Higher	% Same	% Lower	Index
February 2008	24	50	26	49.6
January 2008	18	46	36	43.5
December 2007	25	50	25	53.9
November 2007	20	63	17	52.0

Employment

Employment activity in the non-manufacturing sector contracted in February. ISM’s Non-Manufacturing Employment Index for February registered 46.9 percent, a 3 percentage point increase from the seasonally adjusted 43.9 percent reported in January. Six industries reported increased employment, 6 industries reported a decrease, and 6 industries indicated employment is unchanged from January. Comments from respondents include: "Not replacing retirees or voluntary departures"; "Filled budgeted positions"; and "Hiring freeze still in place."

The industries reporting growth in employment in February are: Other Services*; Agriculture, Forestry, Fishing & Hunting; Mining; Management of Companies & Support Services; Information; and Professional, Scientific & Technical Services. The industries reporting a reduction in employment in February are: Accommodation & Food Services; Wholesale Trade; Public Administration; Educational Services; Construction; and Finance & Insurance.

Employment	% Higher	% Same	% Lower	Index
February 2008	14	63	23	46.9
January 2008	6	70	24	43.9
December 2007	16	71	13	51.8
November 2007	17	68	15	51.4

Supplier Deliveries

The rate of supplier deliveries remained unchanged in February with the index registering 50 percent. A reading above 50 percent indicates slower deliveries.

The industries reporting slowing in supplier deliveries in February are: Real Estate, Rental & Leasing; Health Care & Social Assistance; Retail Trade; Professional, Scientific & Technical Services; Wholesale Trade; and Educational Services. The industries reporting faster supplier deliveries in February are: Utilities; Management of Companies & Support Services; Information; and Public Administration.

Supplier Deliveries	% Slower	% Same	% Faster	Index
February 2008	7	86	7	50.0
January 2008	8	82	10	49.0
December 2007	13	79	8	52.5
November 2007	10	83	7	51.5

Inventories

ISM’s Non-Manufacturing Inventories Index registered 50 percent in February, indicating that inventory levels were unchanged in February when compared to January. Of the total respondents in February, 28 percent indicated they do not have inventories or do not measure them. Comments from members include: "Purposeful reduction"; "Shedding inventory due to lower volume"; and "Based on business trends, need less stock."

The industries reporting increases in inventories in February are: Real Estate, Rental & Leasing; Other Services*; Mining; Construction; Health Care & Social Assistance; and Information. The industries reporting decreases in inventories in February are: Arts, Entertainment & Recreation; Retail Trade; Utilities; Finance & Insurance; Public Administration; and Management of Companies & Support Services.

Inventories	% Higher	% Same	% Lower	Index
February 2008	24	52	24	50.0
January 2008	14	61	25	44.5
December 2007	26	49	25	50.5
November 2007	22	57	21	50.5

Prices

Prices paid by non-manufacturing organizations for purchased materials and services increased in February for the 57th consecutive month. ISM’s Non-Manufacturing Prices Index for February registered 67.9 percent, 2.8 percentage points lower than January’s seasonally adjusted index of 70.7 percent. In February, the percentage of respondents reporting higher prices remained the same at 41 percent. The percentage indicating no change in prices paid remained the same at 54 percent. The percentage of respondents noting lower prices remained the same at 5 percent.

In February, all industries reported an increase in prices paid in the following order: Agriculture, Forestry, Fishing & Hunting; Mining; Real Estate, Rental & Leasing; Construction; Accommodation & Food Services; Management of Companies & Support Services; Information; Arts, Entertainment & Recreation; Other Services*; Retail Trade; Transportation & Warehousing; Health Care & Social Assistance; Public Administration; Utilities; Educational Services; Professional, Scientific & Technical Services; Wholesale Trade; and Finance & Insurance.

Prices	% Higher	% Same	% Lower	Index
February 2008	41	54	5	67.9
January 2008	41	54	5	70.7
December 2007	37	61	2	71.5
November 2007	46	51	3	73.7

Backlog of Orders

ISM’s Non-Manufacturing Backlog of Orders Index contracted in February for the sixth consecutive month, registering 49.5 percent, 3.5 percentage points higher than the 46 percent reported in January. Of the total respondents in February, 36 percent indicated they do not measure backlog of orders.

The industries reporting an increase in order backlogs in February are: Information; Arts, Entertainment & Recreation; Real Estate, Rental & Leasing; Other Services*; Utilities; and Health Care & Social Assistance. The industries reporting lower backlog of orders in February are: Management of Companies & Support Services; Educational Services; Finance & Insurance; Professional, Scientific & Technical Services; Retail Trade; Public Administration; Wholesale Trade; and Transportation & Warehousing.

Backlog of Orders	% Higher	% Same	% Lower	Index
February 2008	23	53	24	49.5
January 2008	13	66	21	46.0
December 2007	20	58	22	49.0
November 2007	17	63	20	48.5

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 contracted for the month of February. The New Export Orders Index for February registered 46.5 percent, compared to January’s index of 52 percent. Of the total respondents in February, 68 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 February are: Utilities; Information; Finance & Insurance; and Retail Trade. The industries reporting a decrease in export orders in February are: Transportation & Warehousing; Accommodation & Food Services; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Professional, Scientific & Technical Services; and Wholesale Trade.

New Export Orders	% Higher	% Same	% Lower	Index
February 2008	16	61	23	46.5
January 2008	21	62	17	52.0
December 2007	22	56	22	50.0
November 2007	26	59	15	55.5

Imports

The ISM Non-Manufacturing Imports Index contracted for the second consecutive month in February. The index registered 49 percent, 7.5 percentage points higher than January’s index of 41.5 percent. In February, 62 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 February are: Information; Arts, Entertainment & Recreation; Other Services*; Health Care & Social Assistance; and Wholesale Trade. The industries reporting a decrease in imports for the month of February are: Public Administration; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Retail Trade; and Accommodation & Food Services.

Imports	% Higher	% Same	% Lower	Index
February 2008	18	62	20	49.0
January 2008	10	63	27	41.5
December 2007	14	73	13	50.5
November 2007	17	65	18	49.5

Inventory Sentiment

The ISM Non-Manufacturing Inventory Sentiment Index in February registered 60.5 percent, 3.5 percentage points higher than the 57 percent reported in January. This indicates that more non-manufacturing purchasing and supply executives feel discomfort with current levels of inventory in February than in January. In February, 29 percent of respondents felt their inventories were too high, 8 percent indicated their inventories were too low, and 63 percent said that their inventories were about right.

The industries reporting a feeling that their inventories are too high in February are: Other Services*; Construction; Information; Accommodation & Food Services; Retail Trade; Health Care & Social Assistance; Transportation & Warehousing; Finance & Insurance; and Wholesale Trade. The industries reporting that their inventories are too low are: Mining and Public Administration.