ISM Non-Manufacturing Index

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The ISM Non-Manufacturing Index helps determine the overall economic strength of the services sector.  Components evaluated are employment, business activity, new orders, and supplier deliveries; which are then compiled into an index.  The nonmanufacturing sector represents a much larger share of the overall U.S. economy when compared to the manufacturing sector, making up approximately 80%; the sector’s economic weight makes it an important sign of growth, stagnation, or contraction. Readings above 50 indicate an expansion while readings below 50 signal decline.

In September, ISM Non-Manufacturing was the lowest it has been in three years at 52.6, dropping 6.7% from August’s reading of 56.4. The index is also down 13.5% from 60.8 in September of 2018.

Despite the decline in index, September’s reading of above 50 marks the 116th consecutive month of growth in the non-manufacturing sector. Leading index growth occurred in utilities, construction and retail trade; industries that reported decreases include educational services and other services. Businesses in this sector report increasing business as Q4 approaches. It follows that the non-manufacturing sector will be virtually unaffected by the trade war, GM strikes, and the Boeing 737 grounding, since the service industry typically serves people locally.

ISM Non-Manufacturing Index

October 3, 2019