Wednesday, 17 of October of 2018

Economics. Explained.  

Purchasing Managers Index — Nonmanufacturing

October 3, 2018

The Institute for Supply Management not only publishes an index of manufacturing activity each month, they publish two days later a survey of non-manufacturing firms — which largely consists of services. The business activity index jumped 4.5 points in September to 65.2 after having risen 4.2 points in August.   That is the highest level for this index since January 2004.  In August, 17 of 18 service-sector  industries  reported expansion.  Good, solid, broad-based growth at a relatively high level.  At its September level the non-manufacturing index equates to GDP growth of 4.6%.

The orders component rose 1.2 points to 61.6 after having climbed 3.4 points in August.  Orders continued to flow in in August at a solid pace.  February (at 64.8) was the strongest month for orders since August 2005.

The ISM non-manufacturing index for employment surged upwards by 5.7 points in September to 62.4 after having risen 0.6 point in August.   The September level of 62.4 is the highest level thus far in the business cycle.  Jobs growth should continue in upcoming months at about the same pace we  have seen of roughly 190 thousand per month.

Finally,  the price component rose 1.4 points in September to 64.2 after having fallen 0.6 point in August.   That is the twelfth  consecutive monthly level above 60.0.  It is clear that non-manufacturing firms are encountering higher prices for their materials.  That will continue to put some upward pressure on the inflation rate.

Stephen Slifer


Charleston, SC

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