Non-manufacturing index slumps back to recessionary level

The Institute for Supply Management released their June 2008 Non-Manufacturing ISM Report on Business today. The Non-Manufacturing Index (NMI) came in at 48.2%. 50% is the breakpoint for growth. NMI had plunged to 44.6% in January 2008 but had rebounded above 50 for the previous 2 months.

NMI is made up of four components: business activity, employment, new orders, and supplier deliveries. Business activity was down from 53.6% in May to 49.9% in June; employment was down from 48.7% to 43.8%; new orders was down from 53.6% to 48.6%; and supplier deliveries was down from 51.5% to 50.5%.

Here is what some of the respondents to the survey were saying:

• "Oil prices are affecting most every supplier we have." (Transportation & Warehousing)


• "Energy costs are beyond the pain point. They are disruptive to every part of our business." (Agriculture, Forestry, Fishing & Hunting)


• "Challenging due to continuing cost pressure from suppliers. Planning on decreased production activity as summer wears on and budgets tighten." (Other Services*)


• "High cost of commodities, fuel prices, are impacting margins and economic conditions are negatively impacting traffic counts and average check amounts." (Accommodation & Food Services)


• "Energy cost is starting to have an effect on cost of products from all sectors." (Wholesale Trade)

In the last few months, businesses seemed to be thinking we were going to avert a recession. Now high prices coupled with the housing crisis is swinging sentiment back to the recession camp.

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