The Institute for Supply Management surveys its members monthly regarding business activity at their respective companies. These surveys are very timely readings on levels of current activity across a broad range of industries. The surveys are compiled into two separate indexes, one for manufacturers and one for nonmanufacturing companies, such as construction, finance, health care, and retail trade.
Last week we noted that the manufacturing index came in at 56.0, up from 54.5 in December. The strong performance of the manufacturing survey in January was boosted by gains in new orders, production, and employment. Today, we highlight the nonmanufacturing index, which registered 56.5 in January, down just 0.1 from December. New orders for nonmanufacturing and activity (equivalent to production in the manufacturing survey) both fell in January but are at relatively high levels. The employment index posted a gain for January and is also solidly above the neutral 50 level.
Overall, both indexes have been posting relatively good results over the past several months, consistent with the better performance of our AIER Leaders index. The Leaders index of our Business-Cycle Conditions indicators has shown improvement over the past four consecutive months, rising to 75 for December. Readings above 50 suggest a low probability for a recession in the months ahead. Yesterday’s data for the nonmanufacturing sector combined with the reading on manufacturing suggest the economy is gaining some momentum.