Friday, 14 of December of 2018

Economics. Explained.  

Purchasing Managers Index — Nonmanufacturing

December 6, 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 rose 2.7 points in November to 65.2 after having declined 2.7 points in October.   This matches the highest level for this index since January 2004.  In October, 17 of 18 service-sector  industries  reported expansion.  Good, solid, broad-based growth continues at a relatively high level.  At its November level the non-manufacturing index equates to GDP growth of 4.3%.

The orders component climbed 1.0 point in November to 62.5 after having declined 0.1 point in October.  Orders continued to flow in at a solid pace in October.  February (at 64.8) was the strongest month for orders since August 2005.

The ISM non-manufacturing index for employment fell 1.3 points in November to 58.4 after having declined 2.7 points in October.   The September level of 62.4 was 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 2.6 points in November  to 64.3 after having declined 2.5 points in October.   That is the fourteenth  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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