ISM Non-Manufacturing Index Signals Expansion

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Although the ISM Non-Manufacturing Index took a slight dip in January, it beat expectations.

On Tuesday, the Institute for Supply Management released its January 2013 Non-Manufacturing Report on Business (also known as the ISM Non-Manufacturing Index or NMI).  Although the NMI took a slight dip to 55.2 from grades1 ISM Non Manufacturing Index Signals ExpansionDecember’s 55.7 it beat economists’ expectations of a decline to 55.0.  A reading above 50 indicates expansion.  Golden Showers from Space

From the report:

The report was issued today by Anthony Nieves, C.P.M., CFPM, chair of the Institute for Supply Management™ Non-Manufacturing Business Survey Committee.  ”The NMI™ registered 55.2 percent in January, 0.5 percentage point lower than the seasonally adjusted 55.7 percent registered in December.  This indicates continued growth at a slightly slower rate in the non-manufacturing sector.  The Non-Manufacturing Business Activity Index registered 56.4 percent, which is 4.4 percentage points lower than the seasonally adjusted 60.8 percent reported in December, reflecting growth for the 42nd consecutive month.  The New Orders Index decreased by 3.9 percentage points to 54.4 percent, and the Employment Index increased 2.2 percentage points to 57.5 percent, indicating growth in employment for the sixth consecutive month.  The Prices Index increased 1.9 percentage points to 58 percent, indicating prices increased at a faster rate in January when compared to December.  According to the NMI™, eight non-manufacturing industries reported growth in January.  Respondents’ comments are mixed about the economy and business conditions; however, the majority of respondents are optimistic about the overall direction.”

Also on Tuesday, the Congressional Budget Office released a report entitled, The Budget and Economic Outlook: Fiscal Years 2013 to 2023.  The report contained the following projections for the current and next two fiscal years, which begin on October 1 and end on September 30:

  • During fiscal year ending on September 30, 2013 the deficit will fall to $845 billion, or 5.3 percent of GDP.  (During the past four years the deficit exceeded $1 trillion.)
  • During fiscal year ending on September 30, 2014 the deficit will fall to 3.7 percent of GDP.
  • During fiscal year ending on September 30, 2015 the deficit will fall 2.4 percent of GDP.

The report was well-received by investors as the stock market rallied on Tuesday.  Q1:2013 US GDP Nowcast Update

The major ETFs expected to respond to the January ISM Non-Manufacturing Index are:

Financial Select Sector SPDR Fund (NYSEARCA:XLF):  +0.98%

iShares Dow Jones US Healthcare Providers Index Fund (NYSEARCA:IHF):  +1.69%

SPDR Utilities Select Sector Fund (NYSEARCA:XLU):  +0.27%

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