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First Cut: ISM Non-Manufacturing Index expands for 118th straight month in November

The ISM Non-Manufacturing Index for November dipped nearly a point to 53.9 after 54.7 in October. Nonetheless, the index has signaled expansion for the service sector for 118 straight months. If conditions are only mildly expansionary at present, respondents’ comments to the survey suggest that things seem more-or-less stable and won’t slip into the recession that has plagued the manufacturing sector for the past four months.

Two index components were up and two were down. Business activity moderated sharply to 51.6 in November after 57.0, however new orders turned higher to 57.1 after 55.6. Activity could well pick up in December as a result. The index for employment gained to 55.5 in November from 53.7 in the prior month and was on the upswing for a second month in a row. Even with slower conditions overall, businesses are still adding workers where they can find the right candidate. The supplier deliveries index kept to its underlying trend at 51.5 in November with no particular delays in the pipeline.

Order backlogs continued to be worked down at 48.5 in November and October. It is only a slight contraction but it does suggest that the uptick in new orders will be needed to keep activity running smoothly.

New export orders expanded only slightly at 52.0 in November after 50.0 in October and was essentially a repeat of what happened in September and August. Orders from outside the US are scarce and uneven, but haven’t completely dried up. The index for imports fell to 45.0 in November from 48.5 and has been on the decline for five months. This was the lowest since 44.5 in July 2012. Some of this is related to uncertain trade policy and worries about the costliness of inputs.

The inventory index was steady at 50.5 in November, a scant expansion as businesses are careful to keep stocks from building. The inventory sentiment index rose to 58.5 in November as businesses remain concerned that unwanted inventories could accumulate.

The prices paid index rose to 58.5 in November from 56.6 in October. The index has been generally consistent with only modest upward price pressures. The month-to-month changes are relatively small and are usually driven by energy prices.

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