Summary
Today's report from the Institute for Supply Management on the economy's non-manufacturing activity during January showed an unexpectedly sharp decline from December. The measure's price component also registered a sizable decline, but it remains high by historical standards, suggesting that cost 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 January service-sector activity came in at a reading of 59.2, down a sharp 4.7 points from December's 63.9. (This series' most recent high was 66.9, occurring last April.) The ISM's service-sector measure works in the same manner as ISM's manufacturing index: a reading above 50.0 indicates sector expansion.
January's non-manufacturing result was decidedly worse than a consensus forecast that was looking for a reading of 62.0.
(NOTE: December and prior data have been revised to incorporate new US Department of Commerce seasonal-adjustment factors used by ISM. In this series, ISM does seasonally adjust the price data. It does not do so in its manufacturing index.)
Today's report showed a 7.0-point decline during January, to 66.6, in the index's price component. However, a 66.6 reading remains high by historical standards, indicating that overall service-sector price pressures persist. (The recent high recorded in this component was 73.6, registered just last month.) January marked the 20th consecutive month of rising prices.
ISM reported a slight drop in January in the number of its survey respondents reporting higher prices -- 37%, versus 38% in December. Only 4% of respondents reported lower prices, while 59% reported prices that were unchanged. This compared with a 26%/4%/70% result a year ago.
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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01/05 59.2 66.6 37% 4% 59%
12/04 63.9 73.6 38% 5% 57%
11/04 61.9 73.2 38% 4% 58%
10/04 61.5 74.0 44% 3% 53%
09/04 58.7 68.8 35% 3% 62%
08/04 59.3 70.1 40% 4% 56%
07/04 63.4 72.4 45% 5% 50%
06/04 61.1 72.9 52% 3% 45%
05/04 63.3 72.0 55% 3% 42%
04/04 66.9 66.9 53% 3% 44%
03/04 64.0 64.8 43% 3% 54%
02/04 60.8 58.0 31% 9% 60%
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Materials/Services Reported in Short Supply During January:
Dry Wall; and Steel, 12th month.
Materials/Services Reported Up in Price During January:
Airfares, 6th month; Aluminum, 13th month; Beef, 2nd month; Building Materials; Carpet; Cheese, 2nd month; Chemicals, 3rd month; Chicken; Class 8 Trailers and Trucks; Copper, 17th month; #2 Diesel Fuel*; Energy; Food; Fuel*, 14th month; Fuel Surcharges; Gasoline*, 14th month; Hardware; Hotel Prices, 2nd month; Natural Gas, 5th month; Paper/Paper Products, 12th month; Pine, Spruce and Treated Lumber; Plastic Bags, 2nd month; Plastic Containers; Plastic Items; Plastic Resin, 2nd month; Plastics, 13th month; Plywood; Pork/Pork Trimmings, 2nd month; PVC; Raw Materials; Roofing Shingles, 3rd month; Stainless Steel; Steel, 15th month; Steel Products, 11th month; and Transportation/Freight Charges, 9th month.
Materials/Services Reported Down in Price During January:
Butter; Computer Hardware, 4th month; Diesel*, 2nd month; Fuel*, 3rd month; Gasoline*, 2nd month; Soy Oil, 2nd month; Tomatoes, 2nd month; and Unleaded Gasoline, 2nd month.
*Reported as both up and down in price.
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