ISM Non-Manufacturing Report: Business Growth, Factory Orders Flat

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Mixed in with the ongoing budget talks in Washington and the December non-farm payroll figures, the markets will be digesting the December 2012 Non-Manufacturing ISM report, which was released on January 4. The Non-Manufacturing index climbed 1.4 points in November to 56.1 percent in December, showing growth momentum for the non-manufacturing sector.

The Business Activity Index, a measure of overall business activity that can help forecast the rate of change in market activity, remained high at 60.3 percent, but was down 0.9 points from November. The New Orders Index grew 1.2 points to 59.3 percent, growing at a faster rate than it did previously. New orders and business activity have both been growing for 41 consecutive months.

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Following Friday’s report that non-farm payrolls grew 155,000 in December and Thursday’s initial jobless claims report that showed first-time claims up 2.7 percent to 372,000, the ISM report indicates that employment activity in the non-manufacturing sector grew for the fifth consecutive month. The index jumped 6 percentage points to 56.3 percent, with 10 industries reporting increased employment, but five industries reporting decreased employment.

On January 2, the December 2012 Manufacturing ISM Report showed that, following one month of contraction, manufacturing PMI grew 1.2 points to 50.7, indicating growth in the manufacturing industry as well.

The Factory Orders Report, which can also be used to diagnose the health of the manufacturing sector, showed that new orders grew $200 million to $477.6 billion. The inventories-to-shipments ratio dropped 0.01 point to 1.27, with $615.2 billion in inventories and $483.7 billion in shipments.

While factory orders are largely unchanged from November, strong non-manufacturing PMI suggests that 3 percent GDP growth expectations in 2013 are achievable.

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