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 July, ISM Non-Manufacturing was 53.7, dropping .25% from June’s reading of 55.1. The index is also down 3.6% from 55.7 is July of 2018.
July’s reading of above 50 marks the 115th consecutive month of growth in the non-manufacturing sector. Leading index growth was real estate, accommodation & food services, and construction; while industries that reported decreases include agriculture, educational services, and wholesale trade. Given the US and China’s inability to come to an agreement as of yet, it is no surprise that trade is down. Unusually high levels of rain negatively affected farmers and their expected food field for the year, leading to decreased or negative revenues. But considering that 13 of the 18 industries included in the ISM Non-Manufacturing Index calculation reported moderate to strong growth in July, it is likely that the index will continue to grow in the near future.
August 5, 2019