Economy

ISM Non-Manufacturing Rises More Than Expected in April

Jon C. Ogg

Published: May 4, 2016 11:55 am

Last Updated: January 13, 2020 9:52 am

The Institute for Supply Management (ISM) has released its non-manufacturing sector report for the month of April via its monthly Report on Business. The composite index came in at 55.7%, which is a full point above the 54.7% consensus estimate from Bloomberg. Another boost here is that this represents a 1.2 point rise from the 54.5% reading in March.

The general business activity index came in at 58.8%, down a point from last month, but it still represents growth for a whopping 81 consecutive months.

As a reminder, a reading above 50% signals growth and one below 50% represents contraction.

April’s index for new orders came in at 59.9%, 3.2 percentage points higher than March. The employment index stayed positive at 53.0% in April, and it was actually an increase of a full 2.7 percentage points.

The Prices Index rose by 4.3 percentage points to 53.4% from the March reading of 49.1%, representing growth in prices again. That might be good news for the Federal Reserve’s ambition to raise interest rates. Another positive in prices is that this indicated prices gains in April for the first time in three months.

There were 13 non-manufacturing industries that reported growth in April. The majority of the respondents’ comments reflect optimism about the business climate and the direction of the economy. Then there were four industries reporting contraction: Other Services, Mining, Transportation & Warehousing and Educational Services.

Supplier deliveries were slower in April for the fourth consecutive month. This index registered 51%, the same percentage that was registered in March. Inventories rose for the 13th consecutive month, coming in at 54% in April, up 1.5 percentage points from what was reported in March. The Backlog of Orders Index showed that order backlogs grew in April, rising by a half-point to 51.5%.

Maybe that waning strength in the U.S. dollar is finally showing up in orders. The ISM’s New Export Orders were described as follows:

Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically based personnel grew in April for the fourth time in the last six months. The New Export Orders Index for April registered 56.5 percent, which is 2 percentage points lower than the 58.5 percent reported in March. Of the total respondents in April, 68 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States.