Summary
Today's report from the Institute for Supply Management on the economy's non-manufacturing activity during December showed a two-point increase from November. Meanwhile, the measure's price component registered a rise of 0.4 points , which remains high by historical standards. In turn, this suggests that service-sector cost pressures persist.
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Earlier today, the Institute for Supply Management reported that its index measuring the economy's December service-sector activity came in at a reading of 63.1, up from November's 61.3. (The 2004 high was 68.4, occurring in April.) This measure operates in the same manner as ISM's manufacturing index: a reading above 50.0 indicates sector expansion.
December's non-manufacturing result was better than a consensus forecast that was looking for a reading of 61.0.
Today's report showed a 0.4-point increase during December, to 71.4, in the index's price component. A 71.4 reading is high by historical standards, indicating that overall service-sector price pressures persist. (The recent high value recorded in this component was 74.6, registered last June.) December marked the 33rd consecutive month of rising prices.
ISM reported no change in December in the number of its survey respondents reporting higher prices -- 38%, versus 38% in November. Only 5% of respondents reported lower prices, while 57% reported prices that were unchanged. This compared with a 26%/4%/70% result at the beginning of 2004.
The following table examines overall and price data over last year's 12 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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12/04 63.1 71.4 38% 5% 57%
11/04 61.3 71.0 38% 4% 58%
10/04 59.8 74.1 44% 3% 53%
09/04 56.7 67.1 35% 3% 62%
08/04 58.2 70.0 40% 4% 56%
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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Materials/Services Reported in Short Supply During December:
Construction Labor and Services; Electric Utility Hardware; Ethanol/Ethyl Alcohol; Lumber; Metal/Metal Products; Roofing Products and Materials, 2nd month; Steel, 11th month; Steel Products, 10th month; and Tires.
Materials/Services Reported Up in Price During December:
Airfares, 5th month; Aluminum, 12th month; Beef; Cheese; Chemicals/Chemical Products, 2nd month; Copper/Copper Cable and Wire, 16th month; Electrical Connectors and Fittings; Fuel*, 13th month; Gasoline*, 13th month; Hotel Prices; Lettuce; Metals/Metal Products; Natural Gas, 4th month; Office Supplies; Paper/Paper Products, 11th month; Personnel; Plastic Bags; Plastic Resin; Plastics, 12th month; Polybags, 4th month; Pork/Pork Trimmings; Resins/Resin-Based Products, 3rd month; Roofing Shingles, 2nd month; Steel, 14th month; Steel Products, 10th month; Tomatoes*, 3rd month; Transportation/Freight Charges, 8th month; Welding Supplies; and Wood Products.
Materials/Services Reported Down in Price During December:
Chemicals; Computer Hardware, 3rd month; Diesel Fuel; Fuel*; Fuel Oil; Gasoline*, 2nd month; Pine, Spruce and Treated Lumber — 2nd month; Petroleum-Based Products/Petroleum Products; Produce; Soy Oil; Tomatoes*; and Unleaded Gasoline.
*Reported as both up and down in price.
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