(Tempe, Arizona) — Business activity in the non-manufacturing sector increased in November 2005, say the nation's purchasing and supply executives in the latest Non-Manufacturing ISM Report On Business. The report was issued today by Ralph G. Kauffman, Ph.D., C.P.M., chair of the Institute for Supply Management Non-Manufacturing Business Survey Committee and coordinator of the Supply Chain Management Program, University of Houston-Downtown. "Non-manufacturing business activity increased for the 32nd consecutive month in November," Kauffman said. He added, "Business Activity and Order Backlogs increased at slower rates in November than in October. New Orders and Employment increased at faster rates. Twelve of 17 non-manufacturing industry sectors report increased activity in November compared to 11 that reported increased activity in October. Although the Business Activity Index indicated a slower rate of increase in November, members' comments are generally positive concerning current business conditions. There is still significant concern about the relatively high level of energy prices and its impact on freight costs and on the prices of other materials and services. There is also concern about shortages of materials in some categories and about the availability of transportation service. The overall indication is continued economic growth in the non-manufacturing sector in November, but with some concern about the impact of energy prices on future business activity." TOP PERFORMING INDUSTRIES The 12 industries reporting growth in November — listed in order — are: Mining; Legal Services; Health Services; Business Services; Retail Trade; Insurance; Other Services*; Utilities; Construction; Public Administration; Wholesale Trade; and Communication. The three industries reporting activity the same as last month are: Transportation; Real Estate; and Entertainment. The two industries reporting decreased activity from October to November are: Agriculture and Finance & Banking. WHAT RESPONDENTS ARE SAYING … "Much pricing pressures and material shortages." (Construction) "Business in retail and middle market growing, but very, very competitive market with margin pressure. Demand for IT and business commodity products/services stable." (Finance & Banking) "The third quarter was very good for us and profits and sales were very good, even when considering the effect of the hurricanes." (Other Services) "The Central Florida economy continues its robust performance." (Public Administration) "Fuels continue to have a negative impact with transportation surcharges running 23 to 30 percent." (Retail Trade) "Freight costs are increasing and there are shipping delays from products coming out of Asia due to the holiday rush." (Wholesale Trade) NOVEMBER 2005 NON-MANUFACTURING INDEX SUMMARIES Business Activity ISM's Non-Manufacturing Business Activity Index in November eased somewhat to 58.5 percent from October's 60 percent, indicating a slower rate of growth of activity in November. This month, 12 sectors report increased business activity, two are reporting decreased activity, and three indicate unchanged activity compared to October. The industries reporting the highest rates of growth of business activity in November are: Mining; Legal Services; Health Services; Business Services; Retail Trade; Insurance; and Other Services*. The industries reporting contraction of business activity in November are: Agriculture and Finance & Banking. New Orders ISM's Non-Manufacturing New Orders Index increased to 59.5 percent in November from 58.2 percent in October. This indicates continued expansion of new orders at a faster rate of growth than in October. Comments from members include: "Additional proposal work/additional work on existing projects"; "Demand for consultants and temp labor edged up"; "Increased activity because of storms Katrina and Wilma"; and "Strong customer demand." Industries reporting the highest rates of growth of new orders in November are: Construction; Legal Services; Health Services; Retail Trade; Utilities; Real Estate; and Entertainment. Industries reporting contraction of new orders in November are: Finance & Banking and Transportation. Employment Employment activity in the non-manufacturing sector increased at a faster rate in November compared to October. This was the 26th consecutive monthly increase in non-manufacturing employment. ISM's Non-Manufacturing Employment Index for November is 57 percent, a rise of 4.1 percentage points from October's 52.9 percent. Fourteen industries are reporting increased employment, two report decreases, and one indicates employment is unchanged from October. Comments from respondents include: "Expansion of sales force"; "Anticipating a stronger second quarter"; "Recruiting new attorneys"; and "Filling need for more people." The industries reporting the highest rates of growth in employment in November are: Mining; Insurance; Entertainment; Legal Services; and Business Services. Industries reporting a reduction in employment in November are: Transportation and Agriculture. Supplier Deliveries The delivery performance of suppliers to non-manufacturing organizations was slower for the 51st consecutive month in November. The index registered 60.5 percent, 2 percentage points higher than in October. A reading above 50 percent indicates slower deliveries. Comments from purchasing and supply executives concerning supplier deliveries in November include: "OEM inventories depleted last month"; "Capacity constraints"; "FEMA grabbing trucks and truckers in Southeast"; "Shortage of truck drivers"; and "Demand exceeding production." The industries reporting the highest rates of slowing in supplier deliveries in November are: Utilities; Wholesale Trade; Legal Services; Communication; Construction and Transportation. No industries are reporting faster supplier deliveries in November. Inventories ISM's Non-Manufacturing Inventories Index registered 54 percent in November, indicating an increase in inventories compared to October. This month's increase follows two consecutive months of unchanged inventories in non-manufacturing industries. Of the total respondents in November, 30 percent indicate they do not have inventories or do not measure them. Comments from members include: "Building in anticipation of reconstruction"; "Escalation in new store openings"; "Hedge against price increases"; and "Longer leadtimes and concern for shortages." The industries reporting the highest rates of increase in inventories in November are: Communication; Retail Trade; Real Estate; Utilities; and Business Services. The industries reporting inventory decreases in November are: Agriculture; Transportation; Construction; Other Services* and Wholesale Trade. Prices Prices paid by non-manufacturing organizations for purchased materials and services increased in November for the 30th consecutive month, but at a slower rate of increase than in October. ISM's Non-Manufacturing Prices Index for November is 74.2 percent, 3.8 percentage points below the 78 percent reported for October. In November, the percentage of respondents reporting higher prices declined from 54 percent to 44 percent, the proportion indicating no change rose from 41 percent to 48 percent, and the number of respondents noting lower prices increased from 5 percent to 8 percent. The industries reporting the highest rates of increase in prices paid in November are: Construction; Utilities; Insurance; Wholesale Trade; and Business Services. Industries reporting price decreases in November are: Transportation and Real Estate. Backlog of Orders ISM's Non-Manufacturing Backlog of Orders Index registered 54 percent in November, 1 percentage point lower than the 55 percent reported in October. November's report of increasing order backlogs marks 30 out of the last 31 months that an increase has been reported in order backlogs. Of the total respondents in November, 40 percent indicated they do not measure backlog of orders. Purchasing and supply executives' comments on backlogs of orders include: "Supply shortage in steel and petro products"; "IT equipment taking longer to deliver"; and "Allocations due to resin shortage." The industries reporting the highest rates of increase in order backlogs in November are: Legal Services; Utilities; Communication; Insurance; and Construction. Industries reporting decreases in backlog of orders in November are: Entertainment; Transportation; Public Administration; Business Services; and Wholesale Trade. New Export Orders Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically based personnel increased for the fifth consecutive month in November. The November index marks 27 out of the past 28 months that the index has exhibited growth. The New Export Orders Index for November is 57 percent, compared to October's 54.5 percent. Of the total respondents in November, 76 percent indicated they either do not perform, or do not separately measure, orders for work outside of the United States. The industries reporting the highest rates of increase in new export orders in November are: Finance & Banking; Mining; Utilities; Retail Trade; and Other Services*. Industries reporting decreases in new export orders in November are: Public Administration and Business Services. Imports In November, the ISM Non-Manufacturing Imports Index registered 56.5 percent, 3 percentage points higher than the 53.5 percent reported in October. This indicates that use of imported materials by non-manufacturing industries increased at a faster rate in November than in October. November's index marks the 31st consecutive month of import growth. In November, 65 percent of respondents reported that they do not use or do not track the use of imported materials. The industries reporting the highest rates of increase in the use of imports in November are: Transportation; Utilities; Other Services*; Business Services; and Retail Trade. Industries reporting decreases in the use of imports in November are: Public Administration and Entertainment. Inventory Sentiment The ISM Non-Manufacturing Inventory Sentiment Index in November registered 60 percent, 5 percentage points higher than the 55 percent reported in October. This indicates that non-manufacturing purchasing and supply executives feel a greater degree of discomfort with current levels of inventory in November than they did during October. In November, 26 percent of respondents felt their inventories were too high, 6 percent indicated their inventories were too low, and 68 percent said that their inventories were about right. The industries reporting the highest rates of feeling that their inventories are too high in November are: Communication; Construction; Transportation; Legal Services; and Health Services. The one industry reporting that its inventories are too low in November is Agriculture.