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Several days into every month, the Institute for Supply Management (ISM) issues its report on non-manufacturing activity nationwide for the prior month. This report is a reading of the health of the services sector. The data follow by a couple of days the companion ISM survey on manufacturing activity. As with the manufacturing index, the non-manufacturing composite ranges from 0 to 100. Readings above 50 indicate that more firms believe business is getting better instead of worse. Readings below 44 suggest that the nation is in recession; gauges above 44, but below 50, imply that the economy is still expanding, but that this specific sector is contracting.
The survey’s findings are given in the aggregate, with a composite index, the ISM Non-Manufacturing Index published. The data describe conditions in non-manufacturing industries, and are based on measures of employment trends, prices, and new orders, and several other key components. Although non-manufacturing sectors make up the majority of the domestic economy, this Index has less market impact than the manufacturing index because non-manufacturing figures tend to be fairly predictable. Still, it is a critical gauge of how the services sector is performing at a point in time and markets can react sharply when there are material surprises.
Within the monthly ISM Non-Manufacturing Index, there are the following components: business activity, new orders, employment, supplier deliveries, inventories, prices, backlog of orders, new export orders, imports, and inventory sentiment. All component readings are measured from 0 to 100, as with the aggregate index. The report is based on data compiled from purchasing and supply executives across the country.