Non-Manufacturing Activity Grew Last Fall

The non-manufacturing-focused survey conducted by the Institute for Supply Management (ISM) during November provided encouraging evidence that business activity continued to expand as we approached the end of 2002. The composite Business Activity Index (BAI) compiled by the ISM came in at a level of 57.4 during the month. This was a reading more than four points higher than the month before.

Any BAI reading above the neutral reading of 50 reflects growth in business activity for the non-manufacturing sector of the economy. Thus, the fact that the average index for the third quarter of 2002 came in at a level of 52.6 and then rose to an average of 55.3 during the first two months of last year's final quarter is very encouraging.

However, the November ISM report didn't offer unambiguously good news. The employment sub-index contracted for the 21st consecutive month, while the BAI component measuring the prices paid by non-manufacturing organizations for purchased materials and services increased for the ninth straight month in November.

On the other hand, the new orders sub-index rose sharply during November, up to a healthy 58.0 reading from the subdued 50.9 October level. Similarly, new export orders increased in indexed form from 49.0 in October to 58.5 during November.