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Friday, October 18, 2019
HomeNewsEconomyNMI: U.S. Service Sector Slowed in September to 3-Year Low

NMI: U.S. Service Sector Slowed in September to 3-Year Low

A Walmart employee who serves as a "customer host," walks in front of the customer service desk at a Walmart super-center location in Gainesville, Florida. (Photo: Laura Baris/People's Pundit Daily/PPD)

ISM Non-Manufacturing Index (NMI) Relies Heavily on Consumer Spending, But Sentiment Driving Levels

A Walmart employee who serves as a "customer host," walks in front of the customer service desk at a Walmart super-center location in Gainesville, Florida. (Photo: Laura Baris/People's Pundit Daily/PPD)
A Walmart employee who serves as a “customer host,” walks in front of the customer service desk at a Walmart super-center location in Gainesville, Florida. (Photo: Laura Baris/People’s Pundit Daily/PPD)

The Institute for Supply Management (ISM) Non-Manufacturing Index (NMI) came in at 52.6 for September, a slower rate of growth that missed the forecast. That’s the worst reading in three years.

Forecasters were looking for a low of 54.0 and a high of 56.4. The consensus forecast was 55.5 after a reading of 56.4 in August.

“The non-manufacturing sector pulled back after reflecting strong growth in August,” Anthony Nieves, Chair of the ISM Non-Manufacturing Business Survey Committee. “The respondents are mostly concerned about tariffs, labor resources and the direction of the economy.”

The Non-Manufacturing Business Activity Index decreased to 55.2 percent, 6.3 percentage points lower than the August reading of 61.5 percent, reflecting growth for the 122nd consecutive month. The New Orders Index registered 53.7 percent; 6.6 percentage points lower than the reading of 60.3 percent in August. The Employment Index decreased 2.7 percentage points in September to 50.4 percent from the August reading of 53.1 percent. The Prices Index increased 1.8 percentage points from the August reading of 58.2 percent to 60 percent, indicating that prices increased in September for the 28th consecutive month. According to the NMI®, 13 non-manufacturing industries reported growth. The non-manufacturing sector pulled back after reflecting strong growth in August. The respondents are mostly concerned about tariffs, labor resources and the direction of the economy.”

While consumer spending remains strong and the holiday shopping season is expected to be stronger in 2019 than in 2018, sentiment and fear drove the numbers down in September.

WHAT RESPONDENTS ARE SAYING
  • “Tariffs are adding uncertainty to short-term pricing on certain commodities, but suppliers are finding alternate solutions. The bigger impacts appear to be on demand side, which is driving short-term favorability in certain domestic markets.” (Accommodation & Food Services)
  • “Demand has been variable — up one month, down the next. I think customers are watching our input costs and buying ahead on the dips, to the extent that contracts allow.” (Agriculture, Forestry, Fishing & Hunting)
  • “We are very busy right now [and] expect to be so for the next 12 months. We are still very shorthanded with qualified labor.” (Construction)
  • “Gearing up for the fourth quarter of 2019. On track to end the year generally as anticipated, considering interest-rate changes, trade and tariff issues and other economic indicators and trends.” (Finance & Insurance)
  • “We continue with low patient census, which affects our orders and revenue.” (Health Care & Social Assistance)
  • “As employee cost [wages] are increasing in this better economy, it is getting harder to fight price increases on goods and services.” (Information)
  • “Costs are going up, from labor to chemicals to metals.” (Management of Companies & Support Services)
  • “While Chinese tariffs are understandable, they are impacting our supply chain decisions. We are actively pursuing alternate sources for our China-based production. At this point, we have not passed on tariff costs to our customers, but we are evaluating all options.” (Other Services)
  • “Business continues to pick up as we quickly approach Q4. Week by week, we inch closer to a much-anticipated holiday retail season, which requires not only last-minute buys, but a push to fill open positions.” (Retail Trade)

The 13 non-manufacturing industries reporting growth in September — listed in order — are: Utilities; Retail Trade; Construction; Mining; Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Public Administration; Management of Companies & Support Services; Finance & Insurance; Transportation & Warehousing; Information; Health Care & Social Assistance; and Professional, Scientific & Technical Services.

The four industries reporting a decrease are: Educational Services; Other Services; Real Estate, Rental & Leasing; and Wholesale Trade.

Earlier this week, the worst manufacturing reading in 10 years sparked a selloff in the markets and reignited fears that the U.S. economy is slowing down and could be headed toward a recession.

Written by
Staff Writing Group

PPD Business, the economy-reporting arm of People's Pundit Daily, is "making sense of current events." We are a no-holds barred, news reporting pundit of, by, and for the people.

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