The Institute for Supply Management’s non-manufacturing composite index increased by 1.4 points month on month, (+2.5 %m/m) to 56.9 in May. The indexes remain strong in 2019, down 2.9% 12MMA y/y.

The ISM nonmanufacturing survey measures the rate and direction of change in activity in nonmanufacturing industries. Surveys are sent to more than 370 purchasing managers in 17 industries. Survey responses reflect the change in the current month compared with the previous month. A value of 50 is neutral, while less than 50 is contracting and greater than 50 is expansionary.

Figure 1 breaks down the details in month on month, 3MMA, (three-month moving average) year on year, 12MMA y/y and momentum comparisons. The business activity moved up 1.7 points to 61.2, up 2.9% MoM. The new order sub-index moved-up 0.5 of a point to 58.6 in May and was up 0.9% MoM. The employment sub-index came in at 58.1, up 4.4 points m/m.

Figure 2 shows the history of the ISM nonmanufacturing index from 2003 to present.  The index has been in the expansionary zone since the great recession ended.

The 16 non-manufacturing industries reporting growth in May — listed in order — are: Accommodation & Food Services; Educational Services; Management of Companies & Support Services; Construction; Transportation & Warehousing; Real Estate, Rental & Leasing; Utilities; Wholesale Trade; Public Administration; Professional, Scientific & Technical Services; Mining; Health Care & Social Assistance; Other Services; Finance & Insurance; Information; and Retail Trade. The only industry reporting a decrease is Agriculture, Forestry, Fishing & Hunting.

At Gerdau we closely monitor the ISM non-manufacturing index since it is an excellent barometer of the present strength as well as a window on the likely short-run future of US nonmanufacturing economy. We have seen that a strengthening nonmanufacturing economy translates to improved steel consumption.