The Institute of Supply Management (ISM) has now released the July Non-Manufacturing Purchasing Managers' Index (PMI), also known as the ISM Services PMI. The headline Composite Index is at 55.7 percent, down 3.4 from 59.1 last month. Today's number came in below the forecast of 58.6 percent.

Here is the report summary:

“The NMI® registered 55.7 percent, which is 3.4 percentage points lower than the June reading of 59.1 percent. This represents continued growth in the non-manufacturing sector at a slower rate. There was a notable decrease in the Business Activity Index, which fell to 56.5 percent, 7.4 percentage points lower than the June reading of 63.9 percent. The July figure still reflects growth for the 108th consecutive month, at a slower rate. The New Orders Index registered 57 percent, 6.2 percentage points lower than the reading of 63.2 percent in June. The Employment Index increased 2.5 percentage points in July to 56.1 percent from the June reading of 53.6 percent. The Prices Index increased by 2.7 percentage points from the June reading of 60.7 percent to 63.4 percent, indicating that prices increased in July for the 29th consecutive month. According to the NMI®, 16 non-manufacturing industries reported growth. There has been a ‘cooling off’ in growth for the non-manufacturing sector. Tariffs and deliveries are an ongoing concern. The majority of respondents remain positive about business conditions and the economy.” [Source]

Unlike its much older kin, the ISM Manufacturing Series, there is relatively little history for ISM's Non-Manufacturing data, especially for the headline Composite Index, which dates from 2008. The chart below shows Non-Manufacturing Composite. We have only a single recession to gauge is behavior as a business cycle indicator.

The more interesting and useful subcomponent is the Non-Manufacturing Business Activity Index. The latest data point at 56.5 percent is down 7.4 from a seasonally adjusted 63.9 the previous month.

ISM Non-Manufacturing

For a diffusion index, this can be an extremely volatile indicator, hence the addition of a six-month moving average to help us visualize the short-term trends.

Theoretically, this indicator should become more useful as the time frame of its coverage expands. Manufacturing may be a more sensitive barometer than Non-Manufacturing activity, but we are increasingly a services-oriented economy, which explains our intention to keep this series on the radar.

Here is a table showing the trend in the underlying components.

Here is a link to our coverage of the latest ISM Manufacturing report.

We will publish our next ISM Non-Manufacturing report on September 6.

Read more updates by Jill Mislinski