ISM Non-Manufacturing Posts Strongest Reading of 2016

The ISM Non-Manufacturing Index has been released for November, and we saw an explosive move higher. The Composite Index came in at 57.2. Bloomberg had a consensus estimate of 55.5, and its Econoday range was 54.9 to 56.5.

October’s reading for the non-manufacturing index was 54.8. What should stand out about November’s strong report is that this was the strongest composite reading of 2016, and also it is post-election data.

As a reminder, a reading above 50.0 indicates that the non-manufacturing economy is generally expanding, and a reading under 50.0 represents that the non-manufacturing economy is contracting.

All components in the index were representative of growth: the Business Activity Index came in at 61.7%, the New Orders Index came in at 57.0% and the Employment Index at 58.2%.

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There were 14 non-manufacturing sectors showing growth and just two sectors showing contraction. The 14 non-manufacturing industries that reported growth in November were: Agriculture, Forestry, Fishing & Hunting; Retail Trade; Arts, Entertainment & Recreation; Transportation & Warehousing; Other Services; Management of Companies & Support Services; Construction; Finance & Insurance; Professional, Scientific & Technical Services; Accommodation & Food Services; Information; Health Care & Social Assistance; Wholesale Trade; and Mining.

The two industries reporting contraction in November were Real Estate, Rental & Leasing and then Public Administration.

This report has pointed to very solid conditions for most of 2016. Anthony Nieves of the Institute for Supply Management said:

The NMI registered 57.2 percent in November, 2.4 percentage points higher than the October reading of 54.8 percent. This represents continued growth in the non-manufacturing sector at a faster rate. This is the 12-month high, and the highest reading since the 58.3 registered in October of 2015. The Non-Manufacturing Business Activity Index increased to 61.7 percent, 4 percentage points higher than the October reading of 57.7 percent, reflecting growth for the 88th consecutive month, at a faster rate in November. The New Orders Index registered 57 percent, 0.7 percentage point lower than the reading of 57.7 percent in October. The Employment Index increased 5.1 percentage points in November to 58.2 percent from the October reading of 53.1 percent. The Prices Index decreased 0.3 percentage point from the October reading of 56.6 percent to 56.3 percent, indicating prices increased in November for the eighth consecutive month at a slightly slower rate. According to the NMI®, 14 non-manufacturing industries reported growth in November. The Non-Manufacturing sector rebounded after a slight cooling-off in October. The majority of respondents’ comments are positive about business conditions and the direction of the overall economy.

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Here is a breakdown of the ISM Non-Manufacturing Index seen so far in 2016:

• October 31, 2016: 54.80
• September 30, 2016: 57.10
• August 31, 2016: 51.40
• July 31, 2016: 55.50
• June 30, 2016: 56.50
• May 31, 2016: 52.90
• April 30, 2016: 55.70
• March 31, 2016: 54.50
• February 29, 2016: 53.40
• January 31, 2016: 53.50