Summary
Yesterday morning, ostensibly in error, the March data for the Institute for Supply Management's service-sector index were released. The results were a good deal stronger than expected, raising suspicions in some quarters about the early, "in-error" distribution of the material.
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Foreword
The early release of these ISM data puts this missive out of its originally scheduled sequence. In its place, I had planned on publishing an additional analysis of recent GDP data Instead, I will publish the GDP material tomorrow.
Also during this weekend, the quarter-end market data referenced in a recent missive will begin to be posted to the GRA website. There will be a progress report on this found in the site's "Latest Missives" section.
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Introduction
The following note appears on the ISM website, introducing the March service-sector material:
"The March Non-Manufacturing ISM 'Report On Business' was released prematurely today by Business Wire in error. The report was scheduled by ISM to be released on Tuesday, April 5 -- the third business day of the month."
Some thoughts on this appear at the end of the missive.
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The Institute for Supply Management's index measuring the economy's March service-sector activity came in at a reading of 63.1, up appreciably from February's 59.8. The March result compared with a consensus estimate of around 59.0.
This series' most recent high was 66.9, occurring in April of 2004. The ISM's service-sector measure works in the same manner as its manufacturing index: A reading above 50.0 indicates sector expansion.
Yesterday's report showed a modest 0.8-point decline in the index's price component during March, to 65.6. However, a 65.6 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 last December.) March marked the 22nd consecutive month of rising prices.
ISM reported no change during March in the number of its survey respondents reporting higher prices -- 43%, versus the same figure in February. Only 1% of respondents reported lower prices (down from 3% in February), while 56% reported prices that were unchanged (up 2% from February). This compared with a 43%/3%/54% result in March of last year.
In the area of price-related matters, the "What Respondents Are Saying" section of yesterday's ISM report contained the following comments:
* "Price of fuel continuing to move prices upward and is now being incorporated into price lists as permanent increases rather than as surcharges."
* "Economy is perking, leading to higher prices for key commodities used by our company."
* "Business continues to accelerate. Prices for anything petroleum-related have increased, carpet as an example."
The following table examines overall and price data over the last 12 months. (NOTE: December and prior data 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.)
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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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03/05 63.1 65.6 43% 1% 56%
02/05 59.8 66.4 43% 3% 54%
01/05 59.2 66.6 37% 4% 59%
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12/04 63.1 73.6 38% 5% 57%
11/04 61.3 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%
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Materials/Services Reported in Short Supply During March:
(NOTE: The number of consecutive months the commodity is listed is indicated after each item.)
Bearings: Paper Roller, Radial, Spherical, Taper; Conveyor Belts; Roofing Insulation and Materials (2); and Steel (14).
Materials/Services Reported Up in Price During March:
Air Conditioning; Aluminum (15); Asphalt/Asphalt Products; Bearings; Beef (4); Cable; Chemicals; Coffee; Coffee Products; Construction Services; Copper (19); Copper Cable and Wire; Corrugated Boxes/Packaging; Dairy Products (2); #1 Diesel Fuel; #2 Diesel Fuel (3); Fuel (16); Gasoline (16); Hotel Rates (4); Iron; Lumber and Lumber Products including Pine, Spruce and Treated (3); Metals/Metal-Related Products (2); Natural Gas (7); Office Supplies (2); Packaging; Paper/Paper Products (14); Petrochemical Products; Petroleum-Based Products (2); Pipe; Plastic Items/Products (3); Plastics (15); Polyester Products; Polyethylene Products (2); Produce; PVC (3); Resin/Resin-Based Products; Roofing Products/Shingles (5); Soy Oil; Stainless Steel (3); Steel (17); Steel Products (13); Transportation/Freight Charges (11); Travel Costs; and Unleaded Gasoline (2).
Materials/Services Reported Down in Price During March:
Computer Hardware (PCs and related products) (6).
Thoughts on the Early Release
Yesterday's missive reporting on the ISM's manufacturing results opined the following:
"Results for the service-sector were released early (original due date was 4/5), which I hope does not represent an overt attempt to soothe the roiled financial markets!"
It certainly appears that this was precisely the intent of getting out the "better-than-expected" ISM service-sector numbers. I am relieved, however, that ISM announced that the problem's source was Business Wire, not the Institute for Supply Management.
There is a paucity of critical, private-sector economic data available to use in assessing the degree to which the government is spinning its data, although we know government numbers are becoming even more suspect (if that is possible!)
The ISM is a highly respected private-sector organization that does generate critical data. Therefore, it would be an absolute tragedy if it were to join today's plethora of spin surgeons!
It is peculiar, though, that Business Wire was in possession of this material on 4/1, when the schedule release date was 4/5.
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