The Institute for Supply Management’s non-manufacturing composite index decreased by 1.8 points month on month, (-3.2% MoM) to 55.1 in June.

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.

ismnonmfg-fig1Figure 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 down 3.0 points to 58.2, down 4.9% MoM. The new order sub-index moved-down 2.8 points to 55.8 in June and was down 4.8% MoM. The employment sub-index came in at 55.0, down 3.1 points m/m. Both import and export indices came in flat MoM for June.

Figure 2ismnonmfg-fig2 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 June — listed in order — are: Real Estate, Rental & Leasing; Other Services; Finance & Insurance; Accommodation & Food Services; Health Care & Social Assistance; Mining; Construction; Educational Services; Professional, Scientific & Technical Services; Utilities; Public Administration; Information; Management of Companies & Support Services; Transportation & Warehousing; Retail Trade; and Wholesale Trade. The only industry reporting a decrease is Arts, Entertainment & Recreation.

An Institute for Supply Management respondent stated, “New residential sales are off the typical pace by 10 to 15 percent year over year. Tariffs are working their way through the system, raising costs on finished materials. Wet weather has slowed construction and starts for the beginning of the season.” (Construction)

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.