Non-manufacturing activity continued to
show solid growth in October, according to the Institute for Supply
Management’s (ISM) Non-Manufacturing Report on Business.
The ISM’s index to measure growth—the
NMI—inched up 1.0 percent to 55.4 in October. A reading above 50 represents
growth. ISM said that economic activity in the non-manufacturing sector grew in
September for the 46th consecutive month.
Of the four key metrics in the report,
including the NMI, three grew in October, with Business Activity/Production up
4.6 percent to 59.7 and Employment up 3.5 percent to 56.2. New Orders dipped
2.8 percent to 56.8. Even with the decline in October, New Orders have grown
for 51 consecutive months, the report noted.
“The report looks very good overall, with
the NMI up slightly compared to the 12-month average of 55.0,” said Tony
Nieves, chair of the ISM’s Non-Manufacturing Business Survey Committee, in an
interview. “Part of the reason for that is business activity being up 4.6
percent. Even though New Orders were down, it was over 60 in August and it is
still in a good place. Employment was also strong and is also a driver for
October’s gains.”
The majority of ISM member respondent
comments in the report were generally positive, with the government shutdown in
October having, in some cases, what Nieves described as a psychological impact
that did not truly show up in the report’s numbers.
Nieves said that October’s numbers are
positive and provide a certain amount of confidence heading into the fourth
quarter compared to a year ago at this time.
“There is still a degree of uncertainty
there but not to the same extent,” he said. “Most of the uncertainty seems to
lie around what the government is going to be doing in regards to healthcare
reform and the overall fiscal policy. But it appears to be more solid than what
we saw last year.”
Inventories in October were flat from
September at 54.5, which Nieves said is in line with the non-manufacturing
sector keeping a watchful eye on inventories and not wanting to be caught with
too much extra stock.
“That is the prevailing practice for the
sector as it is more of a demand-pull environment and less reliant on
inventories having to deal with cycle times like in manufacturing,” he
explained. “I don’t look at it as being anything other than inventory burn off
or a concerted effort to really reduce inventory levels and not keeping it tied
up on shelves which is not cost efficient. The inventory sentiment, which is
indigenous to this report, is still not too high when you compare it to current
business levels.”
Supplier Deliveries and Backlog of Orders
were down 1.0 percent and 0.5 percent, respectively, at 49.0 and 50.0.
On a year-to-date basis through October,
Nieves said non-manufacturing has been on a path of slow incremental growth
that appears to be stable at this point in time.
What’s more, he said things are currently
trending better for the sector than previously forecasted in the ISM’s most
recent semiannual report from April.
“We have seen an uptick in revenue and will
have a better idea when the December numbers come out, but we had such a small
projection of business levels coming out of that forecast,” he said. “All
indications when you look at strong New Orders and Business Activity will be
interesting to keep an eye on.”
About the
Author
Jeff
Berman
Group News Editor
Group News Editor
Jeff
Berman is Group News Editor for Logistics
Management, Modern
Materials Handling, and Supply
Chain Management Review. Jeff joined the Supply Chain Group in 2005 and
leads online and print news operations for these publications. In 2009, Jeff
led Logistics Managementto
the Silver Medal of Folio's Eddie Awards in the Best B2B Transportation/Travel
Website category. Jeff works and lives in Cape Elizabeth, Maine, where he
covers all aspects of the supply chain, logistics, freight transportation, and
materials handling sectors on a daily basis. If you want to contact Jeff with a
news tip or idea, please send an e-mail to jberman@ehpub.com
Source: http://www.scmr.com/
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