The Institute for Supply Management’s non-manufacturing composite index increased by 2.7 points month on month, (+5.0% MoM) to 56.4 in August.

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 up 8.4 points to 61.5, up 15.8% MoM. The new order sub-index moved-up 6.2 points to 60.3 in August and was up 11.5% MoM. The employment sub-index came in at 53.1, down 3.1 points m/m. Imports came in at 50.5, down 3.0 points m/m. Exports came in at 50.5, down 3.0 points m/m.

Figure 2 ismnonmfg-fig2shows 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 August — listed in order — are: Real Estate, Rental & Leasing; Accommodation & Food Services; Public Administration; Retail Trade; Utilities; Construction; Professional, Scientific & Technical Services; Other Services; Agriculture, Forestry, Fishing & Hunting; Transportation & Warehousing; Finance & Insurance; Health Care & Social Assistance; Arts, Entertainment & Recreation; Information; Mining; and Management of Companies & Support Services. The only industry reporting a decrease is Wholesale Trade.

An Institute for Supply Management respondent stated, “Lower mortgage rates have not had a great effect on new residential construction sales. Tariffs continue to apply upward cost pressures to current supply chains.” (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.