By Ryan Barnes
Release Date: The third business day of the month
Release Time: 10am Eastern Standard Time
Coverage: Previous month\'s data
Released By: Institute for Supply Management (ISM)
Latest Release:

The Institute for Supply Management (ISM) releases the ISM Non-Manufacturing Report on Business, also known as the Service Report, each month.The ISM, a non-profit group with more than 40,000 members engaged in the supply management and purchasing professions, saw the need to represent more than just the manufacturing industry, and especially to give attention to the notoriously absent service sector, which reflects the majority of real gross domestic product (GDP).

While the previously-released ISM Manufacturing ROB and its well-known Purchasing Managers Index (PMI) receives the most Wall Street attention, the Non-Manufacturing Report is quickly becoming a well-read and analyzed indicator since it was first released in 1998.

Currently, the report does not have a composite index - the Business Activity Index is the most summary-oriented piece of the report, as it measures respondents' views on the overall level of business activity; the Business Activity Index will usually be the headline figure presented in publications and the media.

The entire report relates to investors because it represents a much larger share of the economy and, most importantly, it covers the hard-to-measure services industries, the fastest-growing part of the U.S. economy. The survey covers many of the same categories that are found in the PMI, including employment, supplier deliveries, inventory levels, production levels and prices.

What it Means for Investors
Because it is a relatively new indicator, the Service Report has yet to gain the same attention of the PMI, but it is quickly appearing on many top analysts' radars because of its breadth of coverage and original survey format. The Service Report is also a timely indicator, coming out just days after the survey month.

For investors, the Service Report may be more useful than the PMI for examining the status of the industries in which they hold investments, and examining the trends taking place in that corner of the market. Each index (there are 10 in total) can be looked at individually, but the Business Activity Index is the most comprehensive; it asks whether the overall business conditions will be better, the same, or worse in the upcoming month.

The magic number for expansion within the Business Activity Index is 50; levels above 50 indicate that the service-related areas of the economy are generally expanding. Rates of change are important as well as where the economy sits within the current business cycle.

  • Consistent and timely; comes out on the third business day of every month, right after the PMI report
  • Shows results for the majority of the total economy, most notably the services industries
  • When used with the ISM Manufacturing Report, the two reports will capture industries making up nearly 90% of total GDP
  • Anecdotal remarks within the release can provide a better perspective from actual professionals.
  • Release shows percentage changes from the previous two months separately, as well as the length of any trend along with its relative velocity.
  • Does not present a diffusion-weighted summary index figure (like the PMI)
  • Survey is very subjective in its data retrieval compared to other indicators, using measures such as "higher", "lower" and "the same"
  • As a relatively new data series, the Service Report fails to provide long-term historical data and correlations to prior business cycles can't be analyzed.
The Closing Line
The ISM Non-Manufacturing Report on Business is a new but telling indicator that is gaining more Wall Street attention with every release, providing insight into business areas not well covered in other indicators.

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