Business Activity Index at 55.6%
New Orders Index at 52.8%
Employment Index at 51.6%

The report was issued by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management (ISM) Non-Manufacturing Business Survey Committee. “The NMI registered 53.3 percent in August, 0.6 percentage point higher than the 52.7 percent registered in July, and indicating continued growth at a slightly faster rate in the non-manufacturing sector. The Non-Manufacturing Business Activity Index decreased 0.5 percentage point to 55.6 percent, reflecting growth for the 25th consecutive month, but at a slower rate than in July. The New Orders Index increased by 1.1 percentage points to 52.8 percent. The Employment Index decreased 0.9 percentage point to 51.6 percent, indicating growth in employment for the 12th consecutive month, but at a slower rate than in July. The Prices Index increased 7.6 percentage points to 64.2 percent, indicating that prices increased at a faster rate in August when compared to July. According to the NMI, 10 non-manufacturing industries reported growth in August. Respondents’ comments remain mixed. There is a degree of uncertainty concerning business conditions for the balance of the year.”

INDUSTRY PERFORMANCE
The 10 non-manufacturing industries reporting growth in August based on the NMI composite index — listed in order — are: Mining; Information; Retail Trade; Wholesale Trade; Transportation & Warehousing; Accommodation & Food Services; Agriculture, Forestry, Fishing & Hunting; Utilities; Public Administration; and Professional, Scientific & Technical Services. The five industries reporting contraction in August are: Educational Services; Arts, Entertainment & Recreation; Management of Companies & Support Services; Health Care & Social Assistance; and Finance & Insurance.

Business Activity
ISM’s Non-Manufacturing Business Activity Index in August registered 55.6 percent, a decrease of 0.5 percentage point when compared to the 56.1 percent registered in July.

New Orders
ISM’s Non-Manufacturing New Orders Index grew in August for the 25th consecutive month. The index registered 52.8 percent, an increase of 1.1 percentage points from the 51.7 percent reported in July.

Employment Activity
Employment activity in the non-manufacturing sector grew in August, as ISM’s Non-Manufacturing Employment Index registered 51.6 percent. This reflects a decrease of 0.9 percentage point when compared to the 52.5 percent registered in July.

Supplier Deliveries
The Supplier Deliveries Index registered 53 percent in August, 2.5 percentage points higher than the 50.5 percent registered in July, indicating that supplier deliveries continued to slow in August.

Inventories
ISM’s Non-Manufacturing Inventories Index registered 53.5 percent in August, 3 percentage points lower than the 56.5 percent reading that was reported in July. Of the total respondents in August, 27 percent indicated they do not have inventories or do not measure them.

Prices
Prices paid by non-manufacturing organizations for purchased materials and services increased substantially in August. ISM’s Non-Manufacturing Prices Index for August registered 64.2 percent, 7.6 percentage points higher than the 56.6 percent reported in July.

New Orders
Orders and requests for services and other non-manufacturing activities to be provided outside of the United States by domestically based personnel grew in August after one month of contraction. The New Export Orders Index for August registered 56.5 percent, which is 7.5 percentage points higher than the 49 percent reported in July.

Imports
The ISM Non-Manufacturing Imports Index grew in August following two consecutive months of contraction. The index registered 53.5 percent, which is 6 percentage points higher than the 47.5 percent reported in July.

Inventory Sentiment
The ISM Non-Manufacturing Inventory Sentiment Index in August registered 56 percent, which is 3.5 percentage points lower than the 59.5 percent reported in July. This indicates that respondents believe their inventories are still too high at this time.

About this Report
The data presented herein is obtained from a survey of non-manufacturing supply managers based on information they have collected within their respective organizations.  The Non-Manufacturing ISM Report On Business is based on data compiled from purchasing and supply executives across the United States. Survey responses reflect the change, if any, in the current month compared to the previous month. Data is seasonally adjusted for Business Activity, New Orders, Prices and Employment. All seasonal adjustment factors are supplied by the U.S. Department of Commerce.

 An index reading above 50 percent indicates that the non-manufacturing economy in that index is generally expanding; below 50 percent indicates that it is generally declining. Supplier Deliveries is an exception. A Supplier Deliveries Index above 50 percent indicates slower deliveries and below 50 percent indicates faster deliveries.

The Non-Manufacturing ISM Report On Business is published monthly by the Institute for Supply Management, the largest supply management research and education organization in the United States. The Institute for Supply Management, established in 1915, is the largest supply management organization in the world. The full text version is posted on ISM’s Web site at www.ism.ws .

Improved business conditions were highlighted by a rise in the seasonally adjusted Markit/BME Germany Purchasing Managers’ Index (PMI) from 56.6 in October to 58.1 in November, its highest level for three months. The headline PMI – a composite indicator designed to give a single-figure snapshot of operating conditions in the manufacturing economy – has now posted above the 50.0 no-change mark for 14 consecutive months, with the latest reading much higher than the survey average (52.0).

The increase in the headline PMI reflected stronger positive contributions from the output, new orders and employment components in November. Production levels rose at the fastest pace for three months, driven by sharp growth in the investment and intermediate goods sectors.

German manufacturers indicated the fastest rise in new orders for four months in November. Although the rate of expansion remained strong, it was slower than the average for the first half of 2010. In line with the trend for output, investment and intermediate goods producers posted the fastest gains in new work. Increased levels of new business were supported by a solid improvement in demand from abroad, but the rate of export order growth eased slightly on the month.

Jobs growth was recorded for the eighth month running in November, reflecting greater production requirements and efforts to expand operating capacity in the manufacturing sector. All three market groups posted an increase in workforce numbers, with intermediate goods producers reporting the fastest growth. Measured overall, manufacturing job creation was the sharpest for over two-and-a-half years.

Increased production requirements also contributed to a robust rise in purchasing activity in November, extending the current period of growth to 14 months. Strong demand for raw materials placed pressure on suppliers in the latest survey period, as highlighted by another steep deterioration in vendor performance.

Attempts to mitigate against supplier delays resulted in a further accumulation of pre-production inventories in November. The current eight-month period of input stock building is the longest since that seen during 1997-1998. Some firms also commented that higher pre-production inventories reflected efforts to protect against accelerating input price inflation.

Average cost burdens rose at the sharpest pace since May, mainly driven by increased copper, steel and energy prices. This led to another solid rise in factory gate charges in November, extending the current period of output price inflation to 10 months.

Although this was comfortably above the neutral 50.0 value (with values above 50 signaling economic growth), the latest reading was the lowest since January (53.7). September data pointed to weaker overall improvements in business conditions at intermediate and investment goods producers, while the consumer goods sector posted an outright deterioration for the first time in eight months.

Measured overall, manufacturing output in Germany increased for the fifteenth consecutive month and at a solid rate during September. However, the pace of expansion slowed further and was the least marked since October 2009. All three market groups posted weaker performances than in August. Output growth slowed sharply in the intermediate and investment goods sectors, while consumer goods production fell for the first time in eleven months.
 
The moderation in overall output growth largely reflected softer new order gains in September. Latest data pointed to the weakest rise in new work for fourteen months. Anecdotal evidence pointed to concerns amongst clients about the economic outlook and a weaker contribution from export demand. This was highlighted by a further slowdown in new export order growth, with the latest index reading the lowest in the current twelve-month period of expansion.

Despite new order growth losing traction in September, job hiring accelerated to its joint-strongest since May 2008. Manufacturers linked the solid pace of workforce expansion to ongoing adjustments to higher output and, in many cases, confidence that workloads will continue to improve. The need to raise operating capacity was highlighted by an increase in backlogs of work for the twelfth successive month.
 
Manufacturers in Germany continued to indicate delays in the receipt of raw materials from suppliers, with average lead-times lengthening for the fourteenth month in a row. The latest sharp deterioration in vendor performance was widely attributed to strong global demand for raw materials and associated shortages of stock at suppliers. Concerns about a drop in raw material availability encouraged some firms to build safety stocks in September. This contributed to a solid rise in pre-production inventories in the manufacturing sector. However, weaker gains in new work resulted in a slower overall rise in input buying during September.

The Markit/BME Purchasing Managers’ Index (PMI) is an early monthly indicator to predict the economic development in Germany. Since 1996 the Index is published under the auspices of the Federal Association Materials Management, Purchasing and Logistics (BME). It is produced by Markit Economics, Henley-on-Thames, and is based on original survey data collected from a panel of over 500 purchasing managers and executives of the German manufacturing sector (selected by industry, size and region to represent the German economy). The German Purchasing Managers’ Index PMI is modeled towards the US Purchasing Managers’ Index (PMI).

“We are worried about the sharp increase in purchasing prices despite the positive development. Prices for steel and industrial metals play a decisive role,” commented CEO Dr. Holger Hildebrandt, Association Materials Management, Purchasing and Logistics (AMMPL) on 2 July. “The global recovery and the weakening of the euro have given a strong impulse to Germany’s industry. The development of the investment goods sector is particularly encouraging,” said Dr. Gertrud R. Traud, Chief Economist at the Landesbank Hessen-Thüringen (Helaba), on 2 July, when assessing the latest PMI figures. So investments were boosted and this was also good news for the labour market. She also pointed to the high level of the PMI, adding that a further increase was unlikely in her view. The economy would probably slow down slightly in the course of the year.

Higher levels of production were recorded in all three market groups monitored by the survey, with growth strongest in the intermediate and investment goods sectors. Consumer goods producers continued to record a much slower expansion of output than the manufacturing sector as a whole. Measured overall, the latest rise in production at 60.3 was slightly stronger than in May (59.2), but still much less marked than the survey-record expansion seen in April (67.0).

The moderation in output growth since the survey-record high registered in April has corresponded with an ongoing easing in new order gains. June data signalled that new order growth slowed for the third month running and was the weakest since December 2009. New export order growth also eased markedly and was the slowest for five months, reflecting weaker rises in all three market groups.

Global players as well as small and medium-sized companies recorded a strong rise in new order, although new orders were below the levels reached in the first three months of this year. The corresponding index stood at 58.1 (59.6), its lowest level since December 2009 (55.9). The demand for industrial goods “made in Germany” has also decreased noticeably.

Increased workloads led to a sharp rise in input buying, with the rate of expansion broadly unchanged since the previous month. Survey respondents also suggested that higher levels of purchasing reflected the need to guard against supplier delays. June data signalled the second-sharpest deterioration in vendor performance since the survey began in April 1996, which was widely linked to bottlenecks and shortages of stock at suppliers. Inventories data highlighted a further solid increase in stocks of inputs at manufacturing companies, which respondents attributed to rising production levels and the deliberate build up of safety stocks. Meanwhile, inventories of finished goods declined in June.

The sharp increase in purchasing prices (65.2 in June after 71.6 in May) was also due to the rise in steel prices. However, this price increase was lower than in the last three months. Selling prices could be raised significantly, with 53.1 in May and 55.7 in June, being a consequence of continued high demand and having a positive impact on operating margins. 

Employment increased for the third month running in June and at the fastest pace for two years. Anecdotal evidence attributed this to higher capacity utilisation and the need to boost production. Stronger demand also contributed to higher levels of unfinished work in June, extending the current period of backlog accumulation to nine months.

The Markit/BME Purchasing Managers’ Index (PMI) is an early monthly indicator to predict the economic development in Germany. It is produced by Markit Economics, Henley-on-Thames, and is based on original survey data collected from a panel of over 500 purchasing managers and executives of the German manufacturing sector (selected by industry, size and region to represent the German economy). The German Purchasing Managers’ Index PMI is modeled towards the US Purchasing Managers’ Index (PMI).

March data pointed to the sharpest rise in German manufacturing production in the fourteen-year survey history. Output growth has accelerated in each month of 2010 so far, driven by a sustained surge in incoming new business. Some firms also noted that reduced caution over warehouse inventories had supported production levels at their plants. While stocks of finished goods and inventories of purchases both fell modestly in March, the rates of reduction were much slower than those seen throughout 2009.
 
Overall new business received by manufacturers in Germany increased at a survey-record pace in March, extending the current period of expansion to nine months. Anecdotal evidence from survey respondents attributed the latest sharp gains in new work to improved economic conditions and restocking by clients. There were also widespread reports that new business growth was driven by a sharp acceleration in demand from abroad. The latest improvement in new export volumes was also the fastest since the survey began in April 1996. Growth of new export orders largely reflected higher levels of global trade and support from a more competitive euro/dollar exchange rate. Respondents cited particularly strong rises in demand from clients in Asia and the US.
 
The ongoing rebound in manufacturing business conditions stimulated a survey-record expansion of input buying in March. Companies noted that purchasing activity increased sharply in response to higher output requirements and the need to replenish stocks of raw materials. However, average lead times from vendors lengthened for the eighth consecutive month in March and at the steepest rate since December 2006. Anecdotal evidence suggested that a delayed response by suppliers to higher demand contributed to stock shortages and delays in the receipt of raw materials from vendors.
 
Supply chain pressures and rising global demand for raw materials resulted in a further sharp increase in average input prices in March. Moreover, the rate of cost inflation accelerated to its strongest since August 2008 and was well above the long-run series average. However, manufacturers indicated only a modest rise in factory gate prices, with respondents attributing weak pricing power to intense competition for new work.

The Markit/BME Purchasing Managers’ Index (PMI) is an early monthly indicator to predict the economic development in Germany. It is produced by Markit Economics, Henley-on-Thames, and is based on original survey data collected from a panel of over 500 purchasing managers and executives of the German manufacturing sector (selected by industry, size and region to represent the German economy). The German Purchasing Managers’ Index PMI is modeled towards the US Purchasing Managers’ Index (PMI).