ISM: Business activity in non-manufacturing sector increases (Comments from Dr. Joe Webb)
Press release from the issuing company
May 5, 2003 -- (Tempe, Arizona) -- (See analysis from Dr. Joe below this release.) -- Business activity in the non-manufacturing sector increased in April 2003, 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 purchasing and supply management program, University of Houston-Downtown. "In April, non-manufacturing business activity increased after decreasing in March," Kauffman said. He added, "Also in April, new orders, inventories, and exports increased."
With the ending of the war in Iraq, purchasing and supply executives report a return to growth in business activity in April. In the non-manufacturing sector, nine industry groups grew in April, while six groups contracted and one reported no change from March. Increased business activity in April was reported by 28 percent of members, compared to March's 23 percent. Reduced activity was reported by 19 percent of members compared to 24 percent in March. In April, the remaining 53 percent of members indicated no change in business activity, the same proportion as in March. The Backlog of Orders Index declined by 1.5 percentage points to 46 percent, indicating a more rapid decrease in backlogs in April compared to March.
The April New Orders Index increased from 47.7 percent in March to 50.6 percent in April. This reflects an increase in April new orders after a decrease in March. Members reported that the prices they pay increased for the 14th consecutive month in April. April's Prices Index is 56.7 percent, down from 62 percent in March, due primarily to the recent drop in oil prices.
This month, 13 industry groups reported paying higher prices compared to March, two reported paying the same, and two industry groups reported paying lower prices in April.
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Free WTT Analysis: Below is a quick take on this news from Dr. Joe Webb. Premium Access Members can view more analysis in his weekly column on Friday, appropriately called “Fridays with Dr. Joe”.
“There was positive news today from the Institute for Supply Management's non-manufacturing index, which rose to 50.7, a sign of growth. Measures below 50 indicate business contraction. The industries reporting the highest growth in business activity in April were insurance, transportation, utilities, real estate, and retailers. Highest rates of contraction were agriculture, wholesalers, communication, and government. Another piece of encouraging news was that export orders increased.
“These indices are expected to continue to improve over the next few months. As I have suggested, we are finally hitting bottom and should now have slow, steady improvement, but there will be no booming rebound. Tomorrow the Fed is expected to hold rates steady. If they lower rates, some will see it as pessimistic. I would look at it as "recovery insurance." The most important post-Iraq news is that energy prices are coming down, which will increase consumer confidence as well as free up dollars to be spent in other, hopefully more productive, areas.”
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