Wednesday, 15 of August of 2018

Economics. Explained.  

Purchasing Managers Index — Nonmanufacturing

August 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 fell 7.4 points in July to 56.5 after having risen 2.6 points in June.   In July, 16 of 18 service-sector  industries  reported expansion.  Good, solid, broad-based growth at a relatively high level.  At its July level the non-manufacturing index equates to GDP growth of 2.5%.

The orders component fell 6.2 points in July to 57.0 after having jumped 2.7 points in June.  Orders continued to flow in in July at a solid pace.  February (at 64.8) was the strongest month for orders since August 2005.

The ISM non-manufacturing index for employment rose 2.5 points in July to 56.1 after having declined 0.5 points in June.   The January level (at 61.6) was by far 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 2.7 points in July to 63.4 after having declined 3.6 points  in June.   That is the tenth 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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