(Tempe, Arizona) – Economic activity in the non-manufacturing sector grew in December for the 107th consecutive month, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM® Report On Business®.
The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management® (ISM®) Non-Manufacturing Business Survey Committee: “The NMI® registered 57.6 percent, which is 3.1 percentage points lower than the November reading of 60.7 percent. This represents continued growth in the non-manufacturing sector, at a slower rate. The Non-Manufacturing Business Activity Index decreased to 59.9 percent, 5.3 percentage points lower than the November reading of 65.2 percent, reflecting growth for the 113th consecutive month, at a slower rate in December. The New Orders Index registered 62.7 percent, 0.2 percentage point higher than the reading of 62.5 percent in November. The Employment Index decreased 2.1 percentage points in December to 56.3 percent from the November reading of 58.4 percent. The Prices Index decreased 6.7 percentage points from the November reading of 64.3 percent to 57.6 percent, indicating that prices increased in December for the 34th consecutive month. According to the NMI®, 16 non-manufacturing industries reported growth. The non-manufacturing sector’s growth rate cooled off in December. Respondents indicate that there still is concern about tariffs, despite the hold on increases by the U.S. and China. Also, comments reflect that capacity constraints have lessened; however, employment-resource challenges remain. Respondents are mostly optimistic about overall business conditions.”
The 16 non-manufacturing industries reporting growth in December — listed in order — are: Arts, Entertainment & Recreation; Transportation & Warehousing; Health Care & Social Assistance; Retail Trade; Information; Utilities; Accommodation & Food Services; Professional, Scientific & Technical Services; Public Administration; Other Services; Finance & Insurance; Wholesale Trade; Agriculture, Forestry, Fishing & Hunting; Educational Services; Construction; and Management of Companies & Support Services. The only industry reporting a decrease in December is Mining.What respondents are saying“New residential home sales have slowed significantly. Tariff delay has slowed material cost increases, but all indications are that January will bring price increases.” (Construction)“Economy still chugging along, despite the rise in interest rates and relentless political claptrap. Mid-winter [activity] appears to be helping a variety of sectors, including agriculture and construction.” (Finance & Insurance)“Overall, our year-end outlook is positive. We are already receiving converted RFPs to orders for 2019. Based on the uncertainty of the tariffs, we have advised our clients to make purchases early in first quarter 2019, if possible, to save money. There is concern in our industry regarding the full year due to tariffs, unless a deal can be reconciled with China. We expect lower profit margins and reduced sales for 2019 until our suppliers can source product from other countries, which may not be until late [in the year].” (Management of Companies & Support Services)“Business is still on an uptrend. Receiving more inquiries for training going into new year.” (Professional, Scientific & Technical Services)“Steady demand and supply. Finding qualified employees is a challenge.” (Public Administration)“Business is exceeding expectations. 2019 should equate or exceed 2018.” (Real Estate, Rental & Leasing)“Business is very good. Strong demand and pipeline.” (Retail Trade)“The end of the year continues to be busy, with high load factor.” (Transportation & Warehousing)“Overall, the industry looks to have a pullback year in demand for 2019. Several factors are contributing to this: stock market retraction, tariffs, trade dispute with China, higher mortgage rates, higher home prices, stagnant wage growth, labor shortages and higher material costs.” (Wholesale Trade)ISM® NON-MANUFACTURING SURVEY RESULTS AT A GLANCE COMPARISON OF ISM® NON-MANUFACTURING AND ISM® MANUFACTURING SURVEYS*DECEMBER 2018 Non-ManufacturingManufacturingIndexSeries Index DecSeries Index NovPercent Point ChangeDirectionRate of ChangeTrend** (Months)Series Index DecSeries Index NovPercent Point ChangeNMI®/ PMI®57.660.7-3.1GrowingSlower10754.159.3-5.2Business Activity/ Production59.965.2-5.3GrowingSlower11354.360.6-6.3New Orders62.762.5+0.2GrowingFaster9551.162.1-11.0Employment56.358.4-2.1GrowingSlower5856.258.4-2.2Supplier Deliveries51.556.5-5.0SlowingSlower3657.562.5-5.0Inventories51.557.5-6.0GrowingSlower1151.252.9-1.7Prices57.664.3-6.7IncreasingSlower3454.960.7-5.8Backlog of Orders50.555.5-5.0GrowingSlower1250.056.4-6.4New Export Orders59.557.5+2.0GrowingFaster2352.852.2+0.6Imports53.554.5-1.0GrowingSlower1052.753.6-0.9Inventory Sentiment59.060.0-1.0Too HighSlower259N/AN/AN/ACustomers' InventoriesN/AN/AN/AN/AN/AN/A41.741.5+0.2Overall EconomyGrowingSlower112Non-Manufacturing SectorGrowingSlower107Non-Manufacturing ISM®Report On Business® data is seasonally adjusted for the Business Activity, New Orders, Prices and Employment Indexes. Manufacturing ISM® Report On Business® data is seasonally adjusted for New Orders, Production, Employment and Supplier Deliveries Indexes.*Number of months moving in current direction.Commodities reported up/down in price and in short supplyCommodities Up in Price
Construction Subcontractors; Copper Products; Electrical Components; Freight (4); Fuel (2)*; Labor (3); Labor — Construction (2); Lettuce; Oil-Based Products; Romaine Lettuce; and Steel Products* (15).Commodities Down in Price
Cheese (2); Computers and Peripherals; Diesel; Fuel* (2); Gasoline (2); Lumber Products (2); and Steel Products*.
The Japanese economy continued to demonstrate underlyingresilience at the end of 2018 despite recent natural disasters andglobal trade tensions, according to the December Nikkei PMI.However, the survey brought signs of waning demand amiddeteriorating global trade conditions, which may further delay theachievement of the Bank of Japan's 2% inflation target.
Steady growth during fourth quarter…
The latest Nikkei PMI data showed the Japanese economy enjoyingresilient growth at the end of 2018, maintaining the longest periodof continuous expansion since the survey started eleven yearsago.
At 52.0 in December, the Nikkei Composite PMI Output Index(which covers manufacturing and service sectors) indicated a modestrate of improvement in business conditions, which is largelysimilar to recent months.
The latest reading also extended the current upturn to 27months, the longest period of growth in the survey's history,underscoring the resilience of the economy despite headwinds fromglobal trade developments and recent natural disasters.