The Institute for Supply Management’s non-manufacturing composite index decreased by 1.4 points month on month, (-3.2% MoM) to 53.7 in July.
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 down 5.1 points to 53.1, down 8.8% MoM. The new order sub-index moved-down 1.7 points to 54.1 in July and was down 3.0% MoM. The employment sub-index came in at 56.2, down 1.2 points m/m. Imports came in at 53.5, up 3.5 points m/m. Exports came in at 53.5, down 2.0 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 13 non-manufacturing industries reporting growth in July — listed in order — are: Accommodation & Food Services; Utilities; Professional, Scientific & Technical Services; Real Estate, Rental & Leasing; Transportation & Warehousing; Construction; Information; Other Services; Finance & Insurance; Public Administration; Management of Companies & Support Services; Mining; and Health Care & Social Assistance. The five industries reporting a decrease are: Arts, Entertainment & Recreation; Agriculture, Forestry, Fishing & Hunting; Retail Trade; Wholesale Trade; and Educational Services.
An Institute for Supply Management respondent stated, “Tariffs continue to push costs higher, and customers are looking for more discounts due to mortgage-rate fluctuations.” (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.