Surprisingly Good News in the US Economic Front

Editor’s note: After surprisingly good employment numbers (with unemployment dropping to 11 percent), there was even more good news in the non-manufacturing front according to a recent report submitted to the Daily Telegraph USA. Still, there are plenty of concerns in the manufacturing and commodity front, which is addressed in this report. This is simply part of the report by ISM, read it in its entirety here. 

“Business Activity Index at 66.0%; New Orders Index at 61.6%; Employment Index at 43.1%; Supplier Deliveries Index at 57.5%

“Economic activity in the non-manufacturing sector grew in June after two consecutive months of contraction, say the nation’s purchasing and supply executives in the latest Non-Manufacturing ISM^® Report On Business.

“The report was issued today by Anthony Nieves, CPSM, C.P.M., A.P.P., CFPM, Chair of the Institute for Supply Management^® (ISM^®) Non-Manufacturing Business Survey Committee: “The NMI^® registered 57.1 percent, 11.7 percentage points higher than the May reading of 45.4 percent. This reading represents growth in the non-manufacturing sector after a two-month period of contraction preceded by 122 straight months of expansion. This is the largest single-month percentage-point increase in the NMI^® since its debut in 1997. (In April, the index suffered its biggest one-month decrease, a 10.7-percent drop.) The Business Activity Index registered 66 percent, up 25 percentage points from May’s figure of 41 percent. The New Orders Index registered 61.6 percent; 19.7 percentage points higher than the reading of 41.9 percent in May. The Employment Index increased to 43.1 percent; 11.3 percentage points higher than the May reading of 31.8 percent.

“‘The Supplier Deliveries Index registered at 57.5 percent, down 9.5 percentage points from May’s reading of 67 percent. Supplier Deliveries is the only ISM Report On Business index that is inversed; a reading of above 50 percent indicates slower deliveries, which is typical as the economy improves and customer demand increases. The higher index readings the previous three months were primarily a product of supply problems related to the coronavirus (COVID-19) pandemic. The Supplier Deliveries Index now more closely correlates to current supply and demand.

“‘The Prices Index figure of 62.4 percent is 6.8 percentage points higher than the May reading of 55.6 percent, indicating that prices increased in June. According to the NMI, 14 non-manufacturing industries reported growth. The non-manufacturing composite index indicated growth after two consecutive months of contraction. The sector’s previous period of contraction was for two months in 2009: November (with an NMI of 49.5 percent) and December (with an NMI of 49.7 percent). Respondents remain concerned about the coronavirus and the more recent civil unrest; however, they are cautiously optimistic about business conditions and the economy as businesses are beginning to reopen,’ says Nieves.

INDUSTRY PERFORMANCE

“The 14 non-manufacturing industries reporting growth in June — listed in order —  are: Agriculture, Forestry, Fishing & Hunting; Accommodation & Food Services; Wholesale Trade; Real Estate, Rental & Leasing; Health Care & Social Assistance; Construction; Retail Trade; Utilities; Transportation & Warehousing; Arts, Entertainment & Recreation; Information; Finance & Insurance; Public Administration; and Professional, Scientific & Technical Services. The three industries reporting a decrease in June are: Mining; Other Services; and Management of Companies & Support Services.

WHAT RESPONDENTS ARE SAYING

• “Businesses are starting to reopen and the economy seems to be on the road to recovery, but let’s not get too complacent, [as] COVID-19 is still a pandemic, [and] a vaccine has not been developed. Economics is the reason for the push for businesses to reopen. Utmost care and awareness still needs to be cautiously and religiously followed.” (Accommodation & Food Services)
• “Surprising recovery to sales volume over the past four weeks.” (Agriculture, Forestry, Fishing & Hunting)
• “Sales have picked up tremendously. Sporadic supply issues. Biggest concern for us is lumber shortages.” (Construction)
• “We are a public higher-education institution. We are expecting budget cuts for fiscal year 2021. Our biggest concern is COVID-19. The plan for a vast majority of higher education institutions is to have students on campus and blend of face-to-face and online classes. However, if students do not effectively social distance, then we could see a dramatic increase in COVID-19 and campuses forced to move to online classes. This will be a major financial blow to revenue for all universities (athletic events, vending, parking, housing, and the like).” (Educational Services)
• “We continue to all work from home globally. Strict restriction on travel and external events. Senior management focusing on a plan for returning to the office.” (Finance & Insurance)
• “COVID-19 has affected us, of course — obtaining PPE supplies has been our focus. Overall census has been very low. Operating rooms, rehab clinics and physician practices were closed or working fewer hours but have since opened back up.” (Health Care & Social Assistance)
• “Advertisers are starting to place more advertisements and the media business is turning around. Generally, we are at the end of the employee furloughs and layoffs. Our work efforts have been focused on navigating COVID-19. We are now shifting to value-add projects. We are cautiously optimistic, although as we get closer to the presidential election, we are on guard of unprecedented civil and social unrest.” (Information)
• “Activity level is holding steady, with the potential of a rebound in the near future.” (Mining)
• “We have seen an overall reduction in our business as a result of COVID-19, with the greatest reduction in the aviation and oil and gas industries. In contrast, the pharmaceutical industry has seen an increase in business during the same time frame.” (Other Services)
• “COVID-19 and the riots have disrupted the normal flow of business. There is no new normal yet.” (Real Estate, Rental & Leasing)