Introduction
Today's release from the Institute for Supply Management on the economy's July non-manufacturing activity reported a large increase, but it merely wiped out most of June's unexpected decline. Meanwhile, the index's price component fell, but not too sharply, indicating that price pressures in the service sector persist.
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Earlier today, the Institute for Supply Management reported that its index measuring the economy's July non-manufacturing activity came in at a reading of 64.8, up from June's 59.9. This measure operates in the same manner as ISM's manufacturing index: A reading above 50.0 indicates sector expansion.
July's non-manufacturing result was a good deal stronger than the consensus estimate, which was looking for something around 62. However, the 64.8 reading merely returned the ISM service-sector index to about where it stood before June's unexpectedly large drop. The May number was reported at 65.2; the April figure was an even stronger 68.4.
Today's report showed a 1.5-point decline during July in the index's price component, to 73.1. Nevertheless, this represented the 28th consecutive month of rising prices, and the 73.1 reading indicated that service-sector price pressures remained fairly strong, overall. ISM did report a decline in the number of its survey respondents reporting higher prices during July, to 45% from June's 55%. Only 5% of respondents reported lower prices, while 50% reported unchanged prices. This compared with a 26%/4%/70% result as recently as January.
The following table examines overall and price data over 2004's first seven months.
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INSTITUTE FOR SUPPLY MANAGEMENT
NON-MANUFACTURING INDEX -- TOTAL
INDEX AND PRICE COMPONENT
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Respondents Reporting
Higher, Lower, or
Unchanged Prices
Month/ Overall Price ---------------------
Year Index Index Higher Lower Unch.
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07/04 64.8 73.5 45% 5% 50%
06/04 59.9 74.6 52% 3% 45%
05/04 65.2 74.4 55% 3% 42%
04/04 68.4 68.6 53% 3% 44%
03/04 65.8 65.7 43% 3% 54%
02/04 60.8 57.3 31% 9% 60%
01/04 65.7 59.7 26% 4% 70%
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