Non-Manufacturing Sector Contracts for First Time Since 2009; NMI at 41.8%

Economic activity in the non-manufacturing sector contracted in April for the first time since December 2009, ending a 122-month period of growth, according to the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM Report on Business.

The report was issued by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management (ISM) Non-Manufacturing Business Survey Committee: “The NMI registered 41.8%, 10.7 percentage points lower than the March reading of 52.5%. This reading represents contraction in the non-manufacturing sector and is the NMI’s lowest since March 2009 (40.1%).

“The Business Activity Index fell 22 percentage points from March’s figure, registering 26% — the lowest reading for that index since the debut of the Non-Manufacturing ISM Report On Business in 1997. The New Orders Index registered 32.9%, 20 percentage points below the reading of 52.9% in March. The Employment Index decreased to 30%, 17 percentage points below the March reading of 47%.

“The Supplier Deliveries Index registered an all-time high of 78.3%, up 16.2 percentage points from the March reading of 62.1%, which limited the decrease in the composite NMI. The Supplier Deliveries Index is one of four equally weighted subindexes that directly factor into the NMI, along with Business Activity, New Orders and Employment. Supplier Deliveries is the only ISM Report on Business index that is inversed; a reading of above 50% indicates slower deliveries, which is typical as the economy improves and customer demand increases. However, the combined 25.9-percentage point increase in March and April was primarily a product of supply problems related to the coronavirus (COVID-19) pandemic.

“The Prices Index figure of 55.1% is 5.1 percentage points higher than the March reading of 50%, indicating that prices increased in April. According to the NMI, two non-manufacturing industries reported growth. The non-manufacturing sector composite index indicated contraction for the first time since December 2009, when the NMI was at 49.7%. Respondents are concerned about the continuing coronavirus impacts on the supply chain, operational capacity, human resources and finances, as well as the uncertain timelines for the resumption of business and a return to normality.”

The two non-manufacturing industries reporting growth in April are: public administration; and finance and insurance. The 16 industries reporting a decrease in April — listed in order — are: arts, entertainment and recreation; agriculture, forestry, fishing and hunting; retail trade; other services; wholesale trade; construction; transportation and warehousing; mining; professional, scientific and technical services; information; accommodation and food services; management of companies and support services; educational services; real estate, rental and leasing; utilities; and health care and social assistance.

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