The report was issued today by Anthony Nieves, CPSM, C.P.M., CFPM, chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee. “The NMI® registered 53.4 percent in February, 0.1 percentage point lower than the January reading of 53.5 percent. This represents continued growth in the non-manufacturing sector at a slightly slower rate.
The Non-Manufacturing Business Activity Index increased to 57.8 percent, 3.9 percentage points higher than the January reading of 53.9 percent, reflecting growth for the 79th consecutive month at a faster rate. The New Orders Index registered 55.5 percent, 1 percentage point lower than the reading of 56.5 percent in January. The Employment Index decreased 2.4 percentage points to 49.7 percent from the January reading of 52.1 percent and indicates contraction after 23 consecutive months of growth.
This is the first time the employment index has contracted since February 2014. The Prices Index decreased 0.9 percentage point from the January reading of 46.4 percent to 45.5 percent, indicating prices decreased in February for the fourth time in the last six months. According to the NMI®, 14 non-manufacturing industries reported growth in February. The majority of the respondents’ comments continue to be positive about business conditions. The respondents are projecting a slight optimism in regards to the overall economy. There is an increase in the number of industries reflecting growth in both New Orders and Business Activity; however, the NMI® has decreased slightly due to the contraction in the Employment index.”
INDUSTRY PERFORMANCE
The 14 non-manufacturing industries reporting growth in February — listed in order — are: Accommodation & Food Services; Management of Companies & Support Services; Real Estate, Rental & Leasing; Utilities; Construction; Finance & Insurance; Transportation & Warehousing; Professional, Scientific & Technical Services; Public Administration; Health Care & Social Assistance; Agriculture, Forestry, Fishing & Hunting; Educational Services; Information; and Wholesale Trade. The three industries reporting contraction in February are: Mining; Arts, Entertainment & Recreation; and Retail Trade.
WHAT RESPONDENTS ARE SAYING …
- “Overall business is increasing.” (Health Care & Social Assistance)
- “Business and revenue holding steady with optimistic future ahead for [the] rest of 2016.” (Information)
- “Economy still in very slow growth mode — some additional work scope to current projects helping to maintain current level of business.” (Professional, Scientific & Technical Services)
- “Local markets are very competitive.” (Finance & Insurance)
- “Industry is being hit with commodity pricing at over 12 year lows.” (Mining)
- “Lower food commodity cost of goods due to strong dollar, crude oil glut, Fed interest rate and demand lowering for U.S. exports.” (Accommodation & Food Services)
- “Overall business transaction volume and inventory levels up year-over-year. Dealing now with more operational capacity issues, both in house and with providers, and difficulty sourcing R&D resources like design, engineering, and sample creation. All good indicators of demand and growth.” (Transportation & Warehousing)
- “Continued pressure on commodity prices, low oil prices and resulting impacts on currency exchange continues to cause anxiety for wholesale customers. This is resulting in cautious ordering and shorter commitments on purchase forecast.” (Wholesale Trade)
| ISM® NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM® NON-MANUFACTURING AND ISM® MANUFACTURING SURVEYS* FEBRUARY 2016 | |||||||||
|---|---|---|---|---|---|---|---|---|---|
| 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® | 53.4 | 53.5 | -0.1 | Growing | Slower | 73 | 49.5 | 48.2 | +1.3 |
| Business Activity/Production | 57.8 | 53.9 | +3.9 | Growing | Faster | 79 | 52.8 | 50.2 | +2.6 |
| New Orders | 55.5 | 56.5 | -1.0 | Growing | Slower | 79 | 51.5 | 51.5 | 0.0 |
| Employment | 49.7 | 52.1 | -2.4 | Contracting | From Growing | 1 | 48.5 | 45.9 | +2.6 |
| Supplier Deliveries | 50.5 | 51.5 | -1.0 | Slowing | Slower | 2 | 49.7 | 50.0 | -0.3 |
| Inventories | 52.5 | 51.5 | +1.0 | Growing | Faster | 11 | 45.0 | 43.5 | +1.5 |
| Prices | 45.5 | 46.4 | -0.9 | Decreasing | Faster | 2 | 38.5 | 33.5 | +5.0 |
| Backlog of Orders | 52.0 | 52.0 | 0.0 | Growing | Same | 2 | 48.5 | 43.0 | +5.5 |
| New Export Orders | 53.5 | 45.5 | +8.0 | Growing | From Contracting | 1 | 46.5 | 47.0 | -0.5 |
| Imports | 55.5 | 46.0 | +9.5 | Growing | From Contracting | 1 | 49.0 | 51.0 | -2.0 |
| Inventory Sentiment | 62.0 | 61.5 | +0.5 | Too High | Faster | 225 | N/A | N/A | N/A |
| Customers’ Inventories | N/A | N/A | N/A | N/A | N/A | N/A | 47.0 | 51.5 | -4.5 |
| Overall Economy | Growing | Slower | 79 | ||||||
| Non-Manufacturing Sector | Growing | Slower | 73 | ||||||
* Non-Manufacturing ISM® Report On Business® data is seasonally adjusted for Business Activity, New Orders, Prices and Employment Indexes. Manufacturing ISM® Report On Business® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries.
** Number of months moving in current direction.
COMMODITIES REPORTED UP/DOWN IN PRICE, AND IN SHORT SUPPLY
Commodities Up in Price
Beef; Consultants (2); Labor (10); Lettuce (2); Paper; Procurement Staff; Produce* (4); Software Development; Software Maintenance; and Sterile Solutions.
Commodities Down in Price
Coffee; Computer Components; Dairy; #1 Diesel Fuel (7); #2 Diesel Fuel (6); Freight Charges (2); Fuel (7); Gasoline (8); Grains; Lumber Products; Produce*; Resin Products (2); Seafood; Steel; and Stretch Film.
Commodities in Short Supply
Labor (5).
Note: The number of consecutive months the commodity is listed is indicated after each item.
*Reported as both up and down in price.
FEBRUARY 2016 NON-MANUFACTURING INDEX SUMMARIES
NMI®
In February, the NMI® registered 53.4 percent, a decrease of 0.1 percentage point when compared to January’s reading of 53.5 percent, indicating continued growth in the non-manufacturing sector for the 73rd consecutive month. 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.
An NMI® above 48.9 percent, over a period of time, generally indicates an expansion of the overall economy. Therefore, the February NMI® indicates growth for the 79th consecutive month in the overall economy, and indicates expansion in the non-manufacturing sector for the 73rd consecutive month. Nieves stated, “The past relationship between the NMI® and the overall economy indicates that the NMI® for February (53.4 percent) corresponds to a 1.8 percent increase in real gross domestic product (GDP) on an annualized basis.”
| NMI® HISTORY | ||||
|---|---|---|---|---|
| Month | NMI® | Month | NMI® | |
| Feb 2016 | 53.4 | Aug 2015 | 58.3 | |
| Jan 2016 | 53.5 | Jul 2015 | 59.6 | |
| Dec 2015 | 55.8 | Jun 2015 | 56.2 | |
| Nov 2015 | 56.6 | May 2015 | 55.9 | |
| Oct 2015 | 58.3 | Apr 2015 | 57.5 | |
| Sep 2015 | 56.7 | Mar 2015 | 56.9 | |
| Average for 12 months – 56.6 High – 59.6 Low – 53.4 | ||||
Business Activity
ISM®‘s Business Activity Index in February registered 57.8 percent, an increase of 3.9 percentage points from January’s reading of 53.9 percent. This represents growth in business activity for the 79th consecutive month. Twelve industries reported increased business activity and four industries reported decreased activity for the month of February. Comments from respondents include: “Higher demand for services” and “Steady month-over-month, but better than forecasted.”
The 12 industries reporting growth of business activity in February — listed in order — are: Management of Companies & Support Services; Utilities; Construction; Accommodation & Food Services; Real Estate, Rental & Leasing; Agriculture, Forestry, Fishing & Hunting; Public Administration; Finance & Insurance; Professional, Scientific & Technical Services; Transportation & Warehousing; Health Care & Social Assistance; and Information. The four industries reporting a decrease in business activity in February are: Mining; Arts, Entertainment & Recreation; Retail Trade; and Wholesale Trade.
| Business Activity | % Higher | % Same | % Lower | Index |
|---|---|---|---|---|
| Feb 2016 | 31 | 51 | 18 | 57.8 |
| Jan 2016 | 30 | 41 | 29 | 53.9 |
| Dec 2015 | 32 | 50 | 18 | 59.5 |
| Nov 2015 | 32 | 51 | 17 | 59.4 |
New Orders
ISM®‘s Non-Manufacturing New Orders Index registered 55.5 percent, a decrease of 1 percentage point from the January reading of 56.5 percent. February represents growth in new orders for the 79th consecutive month at a slightly slower rate compared to January. Comments from respondents include: “Business expansion and seasonal growth” and “New clients and new service requests from existing clients.”
The 11 industries reporting growth of new orders in February — listed in order — are: Accommodation & Food Services; Management of Companies & Support Services; Agriculture, Forestry, Fishing & Hunting; Utilities; Construction; Finance & Insurance; Public Administration; Information; Transportation & Warehousing; Professional, Scientific & Technical Services; and Health Care & Social Assistance. The five industries reporting contraction of new orders in February are: Mining; Arts, Entertainment & Recreation; Other Services; Retail Trade; and Wholesale Trade.
| New Orders | % Higher | % Same | % Lower | Index |
|---|---|---|---|---|
| Feb 2016 | 29 | 52 | 19 | 55.5 |
| Jan 2016 | 28 | 49 | 23 | 56.5 |
| Dec 2015 | 28 | 55 | 17 | 58.9 |
| Nov 2015 | 31 | 55 | 14 | 57.9 |
Employment
Employment activity in the non-manufacturing sector contracted in February for the first time since February 2014. This is after 23 consecutive months of growth. ISM®‘s Non-Manufacturing Employment Index registered 49.7 percent, which reflects a decrease of 2.4 percentage points when compared to January’s reading of 52.1 percent. Seven industries reported increased employment, and six industries reported decreased employment. Comments from respondents include: “Some reduction in force due to flat revenue” and “Streamlining the organization and removing some positions.”
The seven industries reporting an increase in employment in February — listed in order — are: Educational Services; Accommodation & Food Services; Other Services; Finance & Insurance; Wholesale Trade; Health Care & Social Assistance; and Professional, Scientific & Technical Services. The six industries reporting a reduction in employment in February — listed in order — are: Mining; Arts, Entertainment & Recreation; Retail Trade; Public Administration; Information; and Management of Companies & Support Services.
| Employment | % Higher | % Same | % Lower | Index |
|---|---|---|---|---|
| Feb 2016 | 19 | 63 | 18 | 49.7 |
| Jan 2016 | 15 | 68 | 17 | 52.1 |
| Dec 2015 | 20 | 70 | 10 | 56.3 |
| Nov 2015 | 18 | 66 | 16 | 56.0 |
Supplier Deliveries
Supplier deliveries were slower in February for the second consecutive month. The index registered 50.5 percent, which is 1 percentage point lower than the reading of 51.5 percent that was registered in January. A reading above 50 percent indicates slower deliveries, while a reading below 50 percent indicates faster deliveries.
The five industries reporting slower deliveries in February are: Real Estate, Rental & Leasing; Transportation & Warehousing; Accommodation & Food Services; Wholesale Trade; and Public Administration. The five industries reporting faster deliveries in February are: Mining; Educational Services; Agriculture, Forestry, Fishing & Hunting; Information; and Management of Companies & Support Services. Eight industries reported no change in supplier deliveries in February compared to January.
| Supplier Deliveries | % Slower | % Same | % Faster | Index |
|---|---|---|---|---|
| Feb 2016 | 7 | 87 | 6 | 50.5 |
| Jan 2016 | 9 | 85 | 6 | 51.5 |
| Dec 2015 | 6 | 85 | 9 | 48.5 |
| Nov 2015 | 9 | 88 | 3 | 53.0 |
Inventories
ISM®‘s Non-Manufacturing inventories grew for the eleventh consecutive month and registered 52.5 percent in February, which is 1 percentage point higher than the 51.5 percent that was reported in January. Of the total respondents in February, 30 percent indicated they do not have inventories or do not measure them. Comments from respondents include: “To support higher sales” and “About the same, but expected to grow in coming months.”
The 10 industries reporting an increase in inventories in February — listed in order — are: Other Services; Mining; Educational Services; Utilities; Real Estate, Rental & Leasing; Accommodation & Food Services; Information; Finance & Insurance; Wholesale Trade; and Construction. The six industries reporting decreases in inventories in February — listed in order — are: Retail Trade; Management of Companies & Support Services; Transportation & Warehousing; Health Care & Social Assistance; Professional, Scientific & Technical Services; and Public Administration.
| Inventories | % Higher | % Same | % Lower | Index |
|---|---|---|---|---|
| Feb 2016 | 23 | 59 | 18 | 52.5 |
| Jan 2016 | 25 | 53 | 22 | 51.5 |
| Dec 2015 | 26 | 54 | 20 | 53.0 |
| Nov 2015 | 28 | 53 | 19 | 54.5 |
Prices
Prices paid by non-manufacturing organizations for purchased materials and services decreased in February for the fourth time in the last six months. ISM®‘s Non-Manufacturing Prices Index for February registered 45.5 percent, 0.9 percentage point lower than the 46.4 percent reported in January. The proportion of respondents reporting higher prices is 10 percent, 73 percent indicated no change in prices paid, and 17 percent of the respondents reported lower prices.
The five non-manufacturing industries reporting an increase in prices paid during the month of February are: Transportation & Warehousing; Health Care & Social Assistance; Professional, Scientific & Technical Services; Wholesale Trade; and Finance & Insurance. The 10 industries reporting a decrease in prices paid for the month of February — listed in order — are: Management of Companies & Support Services; Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Utilities; Other Services; Public Administration; Construction; Retail Trade; Accommodation & Food Services; and Information.
| Prices | % Higher | % Same | % Lower | Index |
|---|---|---|---|---|
| Feb 2016 | 10 | 73 | 17 | 45.5 |
| Jan 2016 | 12 | 69 | 19 | 46.4 |
| Dec 2015 | 8 | 78 | 14 | 51.0 |
| Nov 2015 | 9 | 75 | 16 | 50.0 |
NOTE: Commodities reported as up in price and down in price are listed in the commodities section of this report.
Backlog of Orders
ISM®‘s Non-Manufacturing Backlog of Orders Index indicates order backlogs in February grew. The index registered 52 percent, which is the same reading that was reported in January. Of the total respondents in February, 39 percent indicated they do not measure backlog of orders.
The six industries reporting an increase in order backlogs in February — listed in order — are: Management of Companies & Support Services; Construction; Finance & Insurance; Real Estate, Rental & Leasing; Transportation & Warehousing; and Wholesale Trade. The five industries reporting a decrease in order backlogs in February are: Mining; Health Care & Social Assistance; Retail Trade; Public Administration; and Professional, Scientific & Technical Services. Six industries reported no change in order backlogs in February compared to January.
| Backlog of Orders | % Higher | % Same | % Lower | Index |
|---|---|---|---|---|
| Feb 2016 | 18 | 68 | 14 | 52.0 |
| Jan 2016 | 21 | 62 | 17 | 52.0 |
| Dec 2015 | 17 | 66 | 17 | 50.0 |
| Nov 2015 | 18 | 67 | 15 | 51.5 |
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 grew in February for the second time in the last four months. The New Export Orders Index for February registered 53.5 percent, which is 8 percentage points greater than the 45.5 percent reported in January. Of the total respondents in February, 67 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.
The six industries reporting an increase in new export orders in February — listed in order — are: Management of Companies & Support Services; Information; Agriculture, Forestry, Fishing & Hunting; Construction; Transportation & Warehousing; and Retail Trade. The three industries reporting a decrease in new export orders in February are: Arts, Entertainment & Recreation; Utilities; and Mining. Six industries reported no change in new export orders in February compared to January.
| New Export Orders | % Higher | % Same | % Lower | Index |
|---|---|---|---|---|
| Feb 2016 | 19 | 69 | 12 | 53.5 |
| Jan 2016 | 11 | 69 | 20 | 45.5 |
| Dec 2015 | 15 | 77 | 8 | 53.5 |
| Nov 2015 | 11 | 77 | 12 | 49.5 |
Imports
Imports of raw materials grew substantially in February after two consecutive months of contraction. This month’s reading at 55.5 percent is 9.5 percentage points higher than the reading of 46 percent reported in January. Fifty-five percent of respondents reported that they do not use, or do not track the use of, imported materials.
The seven industries reporting an increase in imports for the month of February — listed in order — are: Agriculture, Forestry, Fishing & Hunting; Information; Other Services; Accommodation & Food Services; Wholesale Trade; Retail Trade; and Professional, Scientific & Technical Services. The only industry reporting a decrease in imports for the month of February is Mining. Eight industries listed no change in imports in February compared to January.
| Imports | % Higher | % Same | % Lower | Index |
|---|---|---|---|---|
| Feb 2016 | 16 | 79 | 5 | 55.5 |
| Jan 2016 | 5 | 82 | 13 | 46.0 |
| Dec 2015 | 11 | 76 | 13 | 49.0 |
| Nov 2015 | 13 | 76 | 11 | 51.0 |
Inventory Sentiment
The ISM® Non-Manufacturing Inventory Sentiment Index in February registered 62 percent, which is 0.5 percentage point higher than the 61.5 percent reported in January. This indicates that respondents believe their inventories are still too high at this time. In February, 28 percent of respondents said their inventories were too high, 4 percent said their inventories were too low, and 68 percent said their inventories were about right.
The nine industries reporting a feeling that their inventories are too high in February — listed in order — are: Mining; Management of Companies & Support Services; Arts, Entertainment & Recreation; Wholesale Trade; Utilities; Construction; Finance & Insurance; Accommodation & Food Services; and Retail Trade. The two industries reporting a feeling that their inventories were too low for the month of February are: Transportation & Warehousing; and Professional, Scientific & Technical Services. Six industries reported no change in inventory sentiment in February compared to January.
| Inventory Sentiment | %Too High | %About Right | %Too Low | Index |
|---|---|---|---|---|
| Feb 2016 | 28 | 68 | 4 | 62.0 |
| Jan 2016 | 31 | 61 | 8 | 61.5 |
| Dec 2015 | 34 | 61 | 5 | 64.5 |
| Nov 2015 | 37 | 53 | 10 | 63.5 |
