The Non-Manufacturing ISM Report on Business is based on data compiled from purchasing and supply executives nationwide. Survey responses reflect the change, if any, in the current month compared to the previous month. For each of the indicators measured—Business Activity, New Orders, Backlog of Orders, New Export Orders, Inventory Change, Inventory Sentiment, Imports, Prices, Employment, and Supplier Deliveries—the report shows the percentage reporting each response and the diffusion index. An index reading above 50 percent indicates that the non-manufacturing economy in that index is generally expanding, while a reading below 50 percent indicates it is generally declining. Orders to service producers make up about 90 percent of the US economy.

What is Institute for Supply Management (ISM) Non Manufacturing Business Activity?

The Institute for Supply Management’s (ISM) Non-Manufacturing Business Activity Index, commonly referred to as the ISM Non-Manufacturing Business Activity Index, stands as a pivotal indicator in the realm of macroeconomic analysis. At Eulerpool, understanding the granularities and implications of this index is essential for those who navigate the intricate landscape of economic data. The ISM Non-Manufacturing Business Activity Index is part of the broader ISM Non-Manufacturing Report on Business, a monthly report that surveys managers and executives across various service sectors. This index plays a crucial role in gauging the overall economic health by focusing on the activities and sentiments within the non-manufacturing sectors, which include services ranging from retail and hospitality to finance and health care. Services account for a substantial portion of the United States economy—over two-thirds of total GDP. As such, the ISM Non-Manufacturing Business Activity Index provides an invaluable lens through which economists, policymakers, and business leaders can assess economic trajectories and make informed decisions. Distinct from its manufacturing counterpart, this index captures the unique dynamics that drive the service sectors, helping to illuminate trends that might not be apparent in manufacturing data alone. The index is derived from a survey of over 400 purchasing and supply executives across the U.S., each representing different non-manufacturing industries. These individuals are queried about their business activity levels, new orders, employment, and supplier deliveries. The responses are categorized as "better," "same," or "worse" compared to the previous month, and subsequently compiled into diffusion indexes. A reading above 50 indicates expansion in the sector, while a reading below 50 suggests contraction. One of the primary benefits of the ISM Non-Manufacturing Business Activity Index is its timeliness. Released on the third business day of each month, it provides a near real-time snapshot of economic conditions, ahead of many other economic indicators. This early dissemination allows for prompt adjustments and strategic decisions by financial analysts, investors, and corporate planners. Insights from the ISM Non-Manufacturing Business Activity Index are multifaceted. For instance, a sustained increase in the index can herald robust economic growth, prompting central banks like the Federal Reserve to consider tightening monetary policy to prevent overheating. Conversely, a declining trend might signal economic distress, possibly leading to stimulus measures or interest rate cuts to spur activity. In broader economic analysis, the index helps delineate trends in consumer behavior, business confidence, and sectoral shifts. For example, an uptick in business activity often correlates with higher consumer spending, reflecting increased confidence and disposable income. Companies may respond to higher demand by ramping up hiring and investment, thereby conveying a positive feedback loop that bolsters overall economic health. Within the service sectors, the index serves as a barometer for various sub-sectors, each exhibiting distinct characteristics and cycles. Take, for instance, the finance and insurance sector, which is intrinsically linked to interest rate fluctuations and consumer wealth levels. A rising business activity index in this sector might suggest expanding credit availability and heightened investment activities. On the other hand, the healthcare sector, which is less cyclical and more influenced by demographic trends and policy changes, provides different insights. An increase in business activity here may reflect rising health service demand, perhaps due to an aging population or new health regulations. Parsing out these sector-specific nuances allows for a richer understanding of the overall economic context. At Eulerpool, we emphasize the interplay between various components of the ISM Non-Manufacturing Business Activity Index. For instance, the context of new orders—a leading indicator—can provide foresight into future business activity. If new orders exhibit a robust growth trend, one could reasonably anticipate sustained business activity increases in the ensuing months. Similarly, examining supplier delivery times offers clues about supply chain health and potential bottlenecks, critical for sectors dependent on timely inputs. Employment trends within the non-manufacturing index also merit close scrutiny. Rising employment levels within the service sectors indicate business optimism and expanding capacity, while declining employment numbers might signify caution or restructuring. These employment trends contribute significantly to labor market analyses, which in turn, influence wage growth, consumer spending, and inflationary pressures. Moreover, the ISM Non-Manufacturing Business Activity Index is interwoven with other economic indicators, creating a comprehensive picture when analyzed in conjunction. For instance, juxtaposing it with the Manufacturing PMI offers a dual-sector view that highlights comparative strengths or weaknesses in manufacturing versus services. Such comparisons can aid in understanding broader economic shifts and inform diversified investment or policy strategies. In a globalized economy, the reverberations of the U.S. non-manufacturing sector are profound. International investors and policymakers monitor this index to gauge potential spillover effects into global markets. A buoyant U.S. service sector can mean increased imports, strength in the U.S. dollar, and potential shifts in trade balances, all of which have far-reaching implications. In conclusion, the ISM Non-Manufacturing Business Activity Index is an indispensable element of macroeconomic analysis, providing snapshot insights into the performance and sentiment within the expansive U.S. service sectors. At Eulerpool, we leverage this index to deliver nuanced, actionable economic data to our users, empowering them to make informed decisions in an ever-evolving economic landscape. The ISM Non-Manufacturing Business Activity Index is not just a statistic; it is a reflection of real-world economic vitality and a forecast of future economic winds, pivotal for anyone engaged in the intricate dance of economic strategy and planning.