"The NMI (Non-Manufacturing Index) registered 53.2 percent in September, 1.7 percentage points higher than the 51.5 percent registered in August, indicating continued growth in the non-manufacturing sector at a faster rate. The Non-Manufacturing Business Activity Index decreased 1.6 percentage points to 52.8 percent, reflecting growth for the 10th consecutive month, but at a slower rate than in August. The New Orders Index increased 2.5 percentage points to 54.9 percent, and the Employment Index increased 2 percentage points to 50.2 percent, indicating growth in employment for the third time in the last five months. The Prices Index decreased 0.2 percentage point to 60.1 percent, indicating that prices increased in September at a slightly slower rate. According to the NMI, 11 non-manufacturing industries reported growth in September. Respondents' comments continue to be mixed about business conditions, with a slight majority reflecting optimism."The anecdotal information contained in the report is showing a slower situation:
- "General state of the business has not changed in the last three months. The market is still soft for new sales due to financing requirements." (Construction)
- "Business seems to be flat from last month." (Finance & Insurance)
- "Signs that the economy may be improving, but our sector is still flat or declining." (Professional, Scientific & Technical Services)
- "Business activity is generally stable — slightly better than last year." (Accommodation & Food Services)
- "Third quarter is looking profitable with improving confidence and expectations in the economy. Capital expenditures are being approved." (Wholesale Trade)
I've always assumed they include various anecdotal statements because they are representative of the industry or a group of statements. The above statements use the word "stable/flat" is pretty prominent. In other words, things are OK, but not great. No one is saying, "people are literally kicking the door down to buy something."
Let's take a look at some of the data:
Like the ISM manufacturing index, the non-manufacturing index bottomed at the end of 2008 and rose until 2010. Over the last few months we've seen it slip, but it is still showing readings above 50 indicating expansion.
The new orders index is still above 50, but it is also in a clear downtrend.
We can also glean some information from the Federal Reserve's Beige Book:
Activity was largely stable or up slightly for professional and other nonfinancial services. Providers of information technology (IT) services such as computer software saw substantial revenue and sales gains in the Boston and Kansas City Districts, with increased demand for IT labor reported in Chicago as well. Demand for professional services such as accounting held largely steady, with Minneapolis and Dallas noting increases for selected types of consulting and legal services. Conditions were mixed for providers of real estate services, as heightened appraisal activity for refinancing purposes was offset by depressed home sales and consequent limited needs for agents and brokers. Demand for temporary staffing services remained on an upward trend, with increases noted by Boston, Philadelphia, Richmond, and Minneapolis, although Chicago pointed to a slight softening during the reporting period. Reports from the health-care sector were mixed: Boston, Cleveland, and Chicago reported ongoing increases in demand for health-care workers, while Philadelphia indicated a flattening in demand for health-care services and San Francisco noted a decline in the frequency of elective procedures and routine tests. Demand for shipping and transportation services generally expanded, although according to Cleveland the pace of growth slowed and contacts there expect little change from existing volumes in the near term.
Let's take a look at some of the Fed regions:
Boston: Software and information technology contacts in the First District report that business conditions continued to improve. Year-over-year revenue increases ranged from mid-single digits to 15 percent in the most recent quarter. Half of contacted firms increased their headcounts and another was "on the cusp of hiring."Overall, the general tone is one of growth, but muted. Growth is between "lackluster" and growing, but the emphasis seems to be on caution. People are seeking services, but at a reduced pace.
Philly: Service-sector firms generally reported minimal gains or flat rates of activity since the previous Beige Book. A large business services firm reported that client companies were not contracting for as much business as they had indicated earlier in the year. Several health-care organizations noted recent flattening in activity that is interrupting a long growth trend. In contrast, some temporary employment agencies noted that demand had picked up recently. Looking ahead, most of the services firms contacted for this report expect growth to be slow for the rest of the year. Some have reduced their forecasts; as one contact said, "It looks like we were a little too optimistic earlier this year."
Richmond: Services-providing firms also gave mixed reports. Contacts at healthcare organizations noted that demand was typical for the summer, while airport officials and electrical contractors saw a small increase in demand for their services. A telecommunications contact reported accelerating revenues, while several administrative-support firms cited flat or slowing revenue growth. Local officials in Norfolk, Virginia noted that a recently announced shut-down of major military facilities would affect a large number of civilian contractors. Community leaders indicated that they will be vying for other military projects. Price growth slowed slightly at services firms in recent weeks, according to survey respondents.
St. Louis: The District's services sector also has continued to improve since our previous report. Firms in the transportation, business support, telecommunications, and government services industries expanded existing operations and hired new employees. Additionally, firms in the restaurant industry opened several new facilities. In contrast, contacts in the business support services and janitorial services industries reported plans to decrease operations and lay off workers.
Minneapolis: Activity in the professional business services sector increased since the last report. Contacts from the legal sector reported that billings during July were up from a year ago, especially for firms that deal with bankruptcies. A call center is expanding in South Dakota. Appraisers and other professional services firms that support home refinancing reported strong activity over the past month.
Kansas City: Growth in transportation services moderated slightly from previous surveys but remained solid, and a major supplier of diesel fuel reported continued solid sales. Most high-tech services firms reported strong growth in sales, although a few contacts noted softened demand. Business firms' expectations for future sales eased somewhat from the previous period but remained positive.
Dallas: Most staffing firms report that demand continues to grow at a solid pace, and is particularly strong for light industrial, sales, administrative, professional and technical workers. Placement activity continues to be mostly for contract work as employers are still hesitant to hire permanent staff. Near-term outlooks are optimistic, but respondents are cautious about the longer term. Accounting firms note that while demand for tax-related services has slowed seasonally and that for real estate and construction-related work remains nonexistent, there has been a pickup in transactional and consulting activity. Demand for legal services was largely unchanged during the reporting period, with the exception of an uptick in corporate demand for mergers and acquisitions-related activity.
Demand for transportation services remains positive. Railroad respondents noted a broad-based increase in cargo volumes, with shipments of grain products recording the largest increase. Shipping firms said small parcel cargo volumes rose, while large freight shipments declined during the reporting period. Intermodal transportation firms reported a modest increase in shipments. Airline traffic was flat to slightly down since the last report, but is stronger than a year ago. The outlook is for continued stability in air travel demand.
San Francisco: Demand for services improved modestly on balance but remained lackluster overall. Demand for professional, media, and entertainment services was mixed across sectors but appeared to be largely stable at low levels on net. Providers of energy services reported stronger demand for industrial use, with the exception of wood products. Contacts from around the District noted increased business travel and tourism activity, as reflected in higher visitor volumes, hotel occupancy rates, and airline passenger miles, although visitor spending remained weak. Providers of health-care services reported that demand slipped somewhat, which they attributed in part to rising postponements or cancellations of elective procedures and routine tests by individuals who lack health insurance.